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Just prior to the effective date of December 1, 2016, the Department of Labor’s final FLSA rule updating overtime regulations, was blocked by a federal judge in Texas.
The final rule makes significant changes to salary threshold requirements for overtime pay for employees. According to the Department of Labor (DOL) website:
“The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.”
Currently, the final rule is under legal review. What should employers do in the meantime?
If this rule does go into effect later, the DOL is allowed to retroactively enforce the rule back to the original effective date of December 1, 2016. If this happens, any employee paid below the salary threshold would be entitled to overtime pay for the hours worked in excess of 40 hours in any workweek after December 1, 2016.
Be prepared to comply with the Final Rule:
Track hours worked for all employees. A little-known Nevada regulation requires employers to track actual hours worked for every employee. This regulation is not often enforced, but it could come into play in a dispute about how wages were paid. Therefore, it is recommended that employers track actual hours worked for every employee—especially employees currently exempt from overtime (a.k.a., being paid on a salary basis) and making less than $47,476 annually.
There are many electronic tools on the market that can help an employer track employee hours. From simple clock-in and -out to complex project tracking, ask your IT expert for recommendations.
Never reverse a pay increase. While this may seem like a solution, a reverse in pay increase has devastating effects on morale. Recently, an employee described a situation in which his company implemented an increase, took it back, implemented it again and then took it back again. These actions by the employer created feelings of distrust and discomfort for this employee.
The DOL offers a number of resources explaining the Fair Labor Standards Act, including pre-recorded webinars and downloadable employer guides on the website at www.dol.gov/whd/overtime/final2016/. Remember, it is an employer’s responsibility to know these regulations.
Melissa Marsh is an HR Consultant and Owner of Reno-based HRinDemand (www.HRinDemand.com), Director of Workforce Readiness for Northern Nevada Human Resources Association Board of Directors, and NCET’s VP of Tech Bite (www.NCET.org). This column first appeared in the Reno Gazette-Journal.