Proposed Overtime Rule Changes, What’s it All About?
You’ve probably read by now that the U.S. Department of Labor (DOL) has proposed changes to the overtime rules which could affect millions of employers.
So why all of the commotion about these proposed changes? (The final rules are not expected to be released until early 2016).
The current rules require that employers pay employees overtime for every hour they work in excess of 40 hours in a workweek. The current rules exempt certain groups of employees from the overtime pay requirements.
The most commonly used exemption applies to white collar employees. In order to qualify under this exemption, a white collar employee generally must:
- Be salaried, meaning they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”)
- Be paid at least a specific salary threshold of at least $455 per week (the equivalent of $23,660 for a full-year employee)-(the “salary level test”)
- Primarily perform executive, administrative, or professional duties as provided in the DOL regulations (the “duties test”)
Under the proposed rules, the minimum salary in order to qualify under the white collar exemption “salary level test” would be set at the 40th percentile of weekly earnings for full time salaried workers based on Bureau of Labor statistics data. The DOL estimates this to be about $970 per week or $50,440 per year for 2016.
Simply put, in order to meet the white collar exemption salary requirements under the proposed rules, the minimum salary level would increase by $515 per week or $26,780 per year over the current minimums. Failure to meet the requirements would require payment of overtime to employees who previously did not qualify.
There proposed regulations contain additional specifics but the bottom line is that now is the time to begin planning for the impact these changes could have on your business.
BRIAN J. CLARKE – CPA, CVA
Brian has over 25 years of public accounting experience. He is a Certified Valuation Analyst (CVA) and is certified to perform business valuations. He is a graduate of John Carroll University. Brian's other areas of expertise include: Manufacturing, Commercial Printing, Service Industries, Syndicated Real-Estate Partnerships, and Construction.