On Thursday, July 30th, McBrayer hosted a webinar entitled, “The New Overtime Rules Are Coming – Are You Ready?” The webinar was hosted by attorney Cynthia L. Effinger of McBrayer’s Louisville office. This well-attended drew participants eager to understand how the recently-released Department of Labor Notice of Proposed Rulemaking will affect employers throughout the state and nation. This webinar focused on the following core concepts:
- The current state of the overtime exemption
- The proposed rules, their effect, and a timeline for implementation
- How businesses should start preparing to comply with the new regulations
- The consequences of misclassification of employees
Ms. Effinger gave up-to-the-minute information on how employers should contemplate and prepare for the new rules and answered questions from those anxious to know how these sweeping changes will affect their day-to-day operations. If you missed this webinar, don’t worry! The visual presentation slides and a recording of the webinar are available. In addition, the following is a recap of important points from the webinar:
How are the new rules going to change the overtime exemption for “white collar” employees?
Currently, there is an exemption under the Fair Labor Standards Act for employees in certain categories of employment (administrative, professional, executive, etc.) from regulations regarding overtime pay. If those employees perform certain defined duties and meet a minimum salary standard, employers do not have to pay a time and a half hourly rate when those employees exceed 40 hours in a workweek. That minimum salary is currently $455 a week, or $23,600 per year. That minimum is very low, considering that it is meant to exempt higher-level employees in “white collar” jobs who are ostensibly compensated for their overtime hours through higher pay. The president directed the Department of Labor to revise those standards, and the DOL recently released a Notice of Proposed Rulemaking that raised the minimum salary to the 40th percentile of wages, which will likely be $970 per week ($50,440 per year) when the regulation takes effect.
When will this regulation take effect?
The open comment period closes in early September, and a final rule could be issued before the end of the year. However, the DOL itself has stated that the final rule will likely be released sometime in 2016.
Will this exemption salary level stay the same as in years past?
The DOL is looking to create a mechanism to adjust the minimum salary level to keep up with inflation, wage growth or cost of living, so the minimum salary will likely fluctuate upwards with time. There are currently two mechanisms the DOL is evaluating for doing this: 1. Keeping the minimum salary set at all times to the current 40th percentile of all wages, and 2. Adjusting the minimum salary with measurements set by the Consumer Price Index for All Urban Areas, which is a measure of inflation.
How should employers prepare?
It is imperative that employers begin to prepare for these changes now. First, employers should conduct an internal audit to determine which employees will be affected by an increase in the minimum salary for overtime exemptions. Employers should use a higher figure than the $50, 440 minimum salary in the first year, as this number will likely rise over time. Estimating with a higher number will provide employers a few years of breathing room for compliance with the regulations. Once employers have determined which employees will now be non-exempt under the rules, employers should decide to either raise the salaries of those employees to a level where they are still exempt from overtime pay or determine how to track the hours of those employees to provide them with the overtime pay they’ll require when applicable. Employers should also reevaluate their overtime policies (including other work time not generally accounted for, such as answering emails or taking calls after work hours) and mechanisms for tracking employee hours. Finally, employers need to budget for the changes.
What are the dangers of misclassification?
The Department of Labor looks heavily at employee classification, and it can conduct an audit either based on a tip or under its own auspices. Employers that misclassify employees are subject to penalties and liability to those employees, including back wages, liquated damages, attorney’s fees and court costs. There is a two year statute of limitations for failure to pay overtime, and a three year period if the violation was intentional. Recent penalties against employers have been in the millions of dollars, so these violations can add up.
We hope that all attendees found the webinar helpful and insightful. If you are an employer with questions and concerns about the new overtime regulations, please don’t hesitate to contact us!
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Cynthia L. Effinger, attorney with McBrayer, McGinnis, Leslie & Kirkland, PLLC is located in the firm’s Louisville office. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. Her employment law practice is focused on drafting employment manuals and policies, social media, wage and hour, non-compete agreements and workplace discrimination. Ms. Effinger can be reached at firstname.lastname@example.org or (502) 327-5400.
This article is intended as a summary of federal and state law and does not constitute legal advice.