Judge Blocks Changes in Overtime Law Set to Take Effect in December
Posted By Marisa Sanfilippo on November 22, 2016 at 8:27 am
More employees are expected to be eligible for overtime when new law goes into effect
To our readers: A federal judge halted implementation Tuesday of the new overtime rules scheduled to take effect Dec. 1. The Labor Department reportedly is considering a challenge to the judge’s decision. The following article explaining the rules and their effect was written and published before the ruling.
Changes to the law that defines which employees are eligible for overtime will go into effect on Dec. 1, and more salaried employees are expected to be eligible for overtime.
The 2014 changes to the Fair Labor Standards Act (FLSA) of 1938 was also an attempt to modernize and simplify existing procedures to make it easier for both employers and employees to understand and implement.
But the changes to overtime eligibility have caused concern for many employers, who worry they won’t be able to afford to pay their workforce to meet the new standards.
Changes to the law
The so-called Final Rule implements these changes to the FLSA:
- Increase the standard salary threshold for overtime eligibility from $455 per week to $913 per week ($47,476 annually).
- The Department of Labor must automatically reevaluate and update this threshold every three years beginning on Jan. 1, 2020.
- The Highly Compensated Employees salary level will increase from $100,000 to $134,004 annually.
- Employers can use incentive payments such as commissions and nondiscretionary bonuses to satisfy as much as 10 percent of the new salary level.
Millions of workers affected
According to the White House, approximately 4.2 million workers will be directly affected by the new rule. This number makes up only 3.2 percent of the entire workforce subject to the rules under the FLSA.
In terms of gender, 44.3 percent of affected employees are men, versus 55.6 percent who are women.
The changes will have the largest effect on millennials:
|Age Range||Percent affected|
|Younger than 25||7.4%|
|65 and older||3.2%|
The states with the highest number of workers affected by the new rule were California (392,084), Texas (370,398) and Florida (330,870).
It is estimated that an additional 8.9 million workers will have their overtime protection strengthened.
What options do business owners have?
Jason Walker, president of Americas of Deputy, a leading global workforce management solution, says there are four tactics that can be used to ensure compliance to the new law.
- Increase salaried employees to above the threshold level.
- Keep employee salaries as they are, properly track hours, and pay mandated overtime.
- Convert salaried employees making below the threshold level to hourly, properly track hours, and pay mandated overtime.
- Properly track employee hours and limit workers to 40 hours weekly.
In order to do this effectively, employers will have to be more careful in the way they track hours and manage their workforce. This can include:
- Record keeping – New technology can be utilized to ensure records are kept in strict accordance with the new laws. New tools include digital time sheets and GPS tracking for employees.
- Scheduling – In order to optimize schedules, data sets that focus on sales analytics will be invaluable for predicting workforce needs.
- Employee engagement – Managers who are making schedules can work closely with their employees to ensure employee needs are being met in order to promote employee retention and limit turnover and training costs.
Many business owners have found the most effective solution to be working directly with their employees. According to Ben Walker, the CEO for Transcription Outsourcing LLC, the solution for his company was to get everyone on the same page and then work out new hourly rates to make implementing the changes work for the company and employees.
He says, “I was worried that some of our employees would not want to go to hourly out of pride, and I was pleasantly surprised. Once we worked out the numbers with our employees, they actually make about 15 percent more.”
Uncertainty in the future
The law faces many legal challenges. Additionally, if it survives the challenges, it could find itself in the crosshairs once Donald Trump is sworn in as president. He has pledged to roll back may of the regulations implemented throughout President Obama’s tenure.
If it does survive, some changes to the rule may manifest in the new year. These may include removing the automatic increases for cost of living or redefining the overtime parameters by job duties rather than pay level.
Several pending court cases and a new presidential mandate make the future uncertain. Still, many employees anxiously look forward to the possibility of greater stability in their schedules and overall prosperity.