On May 23rd, 2016, the U.S. Department of Labor published the final rule updating the overtime regulations for requiring employers to pay overtime to all eligible employees who work more than 40 hours per week.
President Barack Obama signed a Presidential Memorandum in 2014, instructing the Department of Labor to update the outdated regulations that affected white collar (exempt) workers regarding overtime and minimum wages. The purpose was to simplify and modernize the rules and make them easier to apply and understand.
With the new rules, announced on May 18th by President Obama and Labor Secretary Tom Perez, any worker who earns less than $47,476 must be paid overtime on any worked time over 40 hours per week.
Effective December 1, 2016, employers will have to:
– Pay time-and-a-half for overtime
– Raise workers’ salaries above the new threshold
– Limit workers’ hours to 40 hours a week
– A combination of the above
There are some exemptions to this law; for example certain sales, retail, or service employees who are paid on a commission basis; or agricultural workers who are paid a salary of at least $588 and whose employers gross $500,000 or more per year, or $477.75 per week for workers whose employers gross less than $500,000 per year. Also, the minimum salary level will be increased every three years, beginning on January 1st, 2020.
How does the new law affect your company?
The first and obvious concern for business owners is the increase in labor costs. You need to consider what strategy may be most beneficial, both for your employees and your cash flow. Act cautiously, and don’t just raise everyone’s salary above the minimum or cut their hours to less than 40.
These new regulations are actually a gift. It gives you an opportunity to review your current operations and decide if you want to keep things as they are, or perhaps, streamline and become more efficient. Part of your analysis includes how you are currently using exempt staff. If they are working overtime, how much, when and why? Is it seasonal or continuous? How can you create efficiencies?
Your analysis should include not only if you are able to afford the new salaries, but also if you’d be able to keep up with them down the line. Also, be aware of the different scenarios that you could face if you convert your employees to non-exempt now or in the future. Keep your business needs in mind, and conduct a thorough analysis before making a sudden move that could hurt your entire operation.
Additional benefits of the new overtime rules include happier employees who are more productive. Having well-compensated employees, who don’t feel burnt out or exploited, means that they will be happy, satisfied employees. If they are happy, they will be more productive, which in the end is good for your company. However, as we said before, act carefully, and seek the advice of a savvy business counselor, before making big decisions.
Remember, you need to comply by December 1st, 2016. It is estimated that the new overtime law will benefit 4 million workers across the country. Let’s start working together to define a plan that incorporates the new law and makes the most sense for your business growth. You can find more information pertaining to Minnesota rules specifically in this document, published by the Minnesota Department of Labor and Industry.