The US Department of Labor is poised to propose new rules regarding the minimum salary level for employees exempt from overtime pay. Presently, for an employee to be exempt from overtime pay they must earn $455/week or $23,660/year and meet certain minimum tests related to primary job duties. The Department of Labor, at the encouragement of the President, is proposing an increase in the exempt salary to $970/week or $50,440/year. This poses a significant challenge to the retail community, as many retailers have salaried positions earning less than $50,440/year.
In addition, there is also a proposed increase for the Highly Compensated Employee from $100,000 to $122,148 to make them exempt from overtime.
The final rule will most likely be published in May. Once it is published, it will become effective 60 days later. At this time, we do not know exactly what the new exempt salary amount will be, but we do know it will be much greater than the current $23,660/year. And it has yet to be determined if the Department of Labor will make changes to the existing duties test.
So what can you do now to prepare?
- FIRST STEP
- Assess where you are now. Prepare a complete roster of ALL salaried employees.
- SECOND STEP
- Determine all employees who are earning less than $50,440/year. Please understand, this salary amount could be different in the final rule, but we have to work with what we know now.
- THIRD STEP
- Review the respective Position Descriptions of the affected employees and determine approximately how many hours are used each week to fulfill the job responsibilities. Also, are the position descriptions up to date? This third step is important to determine ways of reducing overtime.
- FOURTH STEP
- Begin the process of deciding on your alternatives. Determine the number of hours regularly worked and how much overtime would be owed to the employee under the new rule. Review these cases to determine whether a salary increase to $50,440 would be best or if it would be better to pay the overtime. Consider how this increase may impact employees who are already at this salary level – will adjustments be necessary to those salaries?
Since some employees that are currently salaried will become hourly nonexempt, how will you determine their new hourly rate? Will there be an adjustment, based on the amount of overtime in the calculation?
- FIFTH STEP
- Begin to think about how you will implement your decisions surrounding the new rule. It is important to be sensitive to the concerns of these key associates—if they are currently salaried, they obviously are an important part of your management team. Also, begin to think about HOW you want to communicate the changes---group meetings, individual meetings or a combination of both. It will be important to emphasize that this is NOT your company’s new rule but rather it is your company complying with a new rule from the US Department of Labor. You may want to also consider how it will impact recruitment of new talent into your company.
Now is the time to begin the process. Even though we are not certain of the exempt salary amount, there is work you can do right now and steps you can take to prepare for the new rule. GET STARTED…IT’S COMING!
Disclaimer - This document was designed to provide education and assistance to you, our members, as you evaluate the proposed overtime rule. It does not purport to be legal advice or professional direction. We recommend you work closely with your legal counsel and human resource professionals to determine the best plan for your specific business.