Overtime Rule Changes

SESCO Management Consultants

The U.S. Department of Labor (DOL) has proposed that the White-Collar exemption salary threshold of $35,568 be increased to $55,068 per year. ***State law may require a salary threshold that exceeds the proposed federal salary threshold. ***

The DOL also is proposing automatic increases every three years to the overtime threshold.

To be exempt from overtime under the Fair Labor Standards Act’s "White Collar" Executive, Administrative and Professional exemptions, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.

The new rule is subject to a period of public comment and won’t take effect for several months.

As SESCO’s history is rooted in Wage and Hour compliance and representation of clients before the DOL, we recommend that the following steps be implemented now so as to prepare for these significant changes:

• Review your current salary-exempt positions and simply identify those who make less than $55,068 per year.

• Request/require these positions to begin to maintain an accurate record of time, if not already, to determine actual hours worked. Use a reason such as benefits, etc. – do not reference DOL.

• Determine whether currently classified salary-exempt employees who make less than $55,068 work in excess of 40 hours per week.

• If overtime is worked, determine if hours of work can be reduced to 40 or less so as to avoid an increase in the salary or transitioning the pay plan to a nonexempt plan with overtime.

• If, in fact, the position is required to work over 40 on a regular basis, then you will need to determine whether or not you wish to increase the salary in one fell swoop to the minimum requirement, $55,068.

• If this increase is not practical, you will need to determine whether or not you wish to implement a nonexempt pay plan which includes an hourly rate with time and one-half over 40 or SESCO’s recommended Fluctuating Workweek Method of Payment which is a guaranteed salary pay plan with half-time for hours worked in excess of 40 hours per week. The fluctuating workweek is a very viable pay plan for both employer and employee and will be the least disruptive to both parties. However, we strongly recommend that you contact SESCO before implementing such a program to not only ensure compliance with the DOL regulations, but also ensure that it is properly implemented and communicated to staff so that there is no confusion.

Contact your HR and employment law partner with any questions or concerns. For assistance, contact us at 423-764-4127 or by email at [email protected]