Overtime Exemption Rule Changes
The Department of Labor (“DOL”) has released its final rule that is intended to provide stronger overtime protection and clarity to both workers and employers. Read the Final Rule here. This general summary email is the first in a series our office will publish on the new overtime rule.
To determine if a white collar employee is exempt from overtime requirements, an employer must assess (i) how the employee is paid (the “salary basis test”); (ii) how much the employee earns (the “salary level test”); and (iii) whether the employee primarily performs certain duties that are excluded from overtime protections (the “job duties test”).
The DOL has provided a range of options for employers responding to the updated standard salary level. For each affected employee newly entitled to overtime pay, employers may:
- increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
- pay overtime rate of pay for any hours over 40;
- reduce or eliminate overtime hours, reorganize workloads, adjust schedules or spread work hours;
- adjust wages to reallocate base salary and overtime pay to account for hours worked over 40 to hold total weekly pay constant; or
- use some combination of these approaches.
Nothing in the rule requires employers to change employees’ pay to hourly from salaried, even if the employees’ classification changes from exempt to overtime eligible.
Except for jobs specified by the DOL, there are no hard-and-fast rules about who is and is not exempt from overtime pay. Under Department of Labor guidelines, the answer to the question depends on the facts and circumstances of each employee’s work situation. Please look for future emails from Messick & Lauer detailing specific areas of the new rule.