Overtime Pay – What Business Owners Need to Know about the Proposed Changes

Employers across the country are struggling with proposed changes that could affect their ability to make payroll. The Department of Labor and the Obama Administration are in the process of updating the Fair Labor Standards Act (FLSA).

WHAT BUSINESS OWNERS NEED TO KNOW

1. The revised rule is expected to increase the salary levels for non-exempt employees leaving more people eligible to be classified as non-exempt. The employees would need to start tracking their hours and would be eligible to receive over-time pay.  The current FLSA exemption of $455 per week ($23,660 per year) would increase to $970 weekly ($50,400 annually).
2. The current threshold for highly compensated employees is currently $100,000 per year. The proposal increases the salary level to $121,148 or based on inflation.
3. The DOL wants to increase the thresholds on an annual basis (including threshold increases for the highly compensated employees).
4. Workplace flexibility will be a challenge. At this time it is unclear as to whether there will be a significant change in the duties test. Also to be determined, is whether payment of nondiscretionary bonuses will be included to determine salary.
5. Federal Government vs. State Law. Employers in states with more restrictive wage and hour laws will be faced with trying to implement new rules that are contradictory to their state law.

Although current rules provide for exemptions for both minimum wage and overtime pay for certain employees who are doing bona fide work in executive, administrative, professional, outside sales, and some computer jobs, critics say that the new rule is obscure. They also say the proposed changes will place undue burden on employers and unreasonable cost restraints on non-profit organizations and some service industries.

The United States Chamber of Commerce opposes the changes citing negative impacts to small businesses and limited employment opportunities.  Some workers’ rights organizations support the new proposal claiming new rules would create growth for the economy and increase pay so younger employees can attain financial stability.

For more information regarding the Wage and Hour information, visit the United States Department of Labor website at http://www.dol.gov/whd/overtime/fs17r_geico.htm