Breaking News: Final Overtime Rule Released



Yesterday, the United States Department of Labor released its highly-anticipated (and much-debated) final rule regarding overtime compensation.  Here is a link to the Department of Labor’s Fact Sheet on the new rule:  DOL Fact Sheet on New Overtime Rule

Prior to release of the rule, every prognosticator was trying to predict the new threshold salary for exempt employees.  Currently, that salary is $23,660.  Under the new rule, the threshold salary is $47,476.  That is a massive increase for employers.

The new rule becomes effective on December 1, 2016.  On that date, employees with an annual salary of $47,476 or less must be paid overtime.  I previously advised that employers should begin planning for the new rule here:  What Would Saban Do? Preparation for DOL’s New Overtime Rules  If you have not done so, it’s time to conduct a wage audit of your employees and make difficult decisions regarding salaries.

What Would Saban Do? Preparation for DOL’s New Overtime Rules


businessman-311337_640 (1)We all procrastinate.  Give us a deadline and we’ll wait to the last minute to complete the project.  At the University of Alabama, Nick Saban has rejected that tendency and turned The Process into forward thinking preparation.  While college football players aren’t entitled to overtime compensation, employers can adopt some principles of The Process and start preparing for the Department of Labor’s new overtime rules.

The release-date for the new overtime rules is unclear.  The Department of Labor’s Fall 2015 Unified Agenda stated that the anticipated release date would be in July 2016.  However, in November of 2015, Solicitor of Labor M. Patricia Smith said the rules wouldn’t be issued until “late 2016”.

If you start preparing now, the uncertainly of the release date won’t have as much impact on your business.  We know that the threshold salary to exempt employees from overtime is going to increase.  Right now, an employee making a salary of $23,660 can potentially be exempted from overtime requirements.  In other words, if you pay an employee a minimum salary more than $23,660 and they perform certain executive, administrative or professional duties, you don’t have to pay them overtime.

That threshold amount is going to increase.  The Department of Labor’s draft rule proposed to increase the salary requirement to $50,440 — which is the 40th percentile for full-time salaried workers in America.  Legal pundits believe there is some potential for compromise on the amount, but everybody agrees there will be an increase.  The 35th Percentile is $44,304 per year and the 30th Percentile is $40,196 per year.

Potentially, your business has employees who are making more than the current threshold of $23,440, but less than the potential new threshold — and you are not paying them overtime.  But, under the new DOL regulations, you could be required to pay them overtime.  Start identifying those employees now.  Also, you need to be thinking about tough internal policy decisions.  Do you increase the salary of those employees to “bump” them over the new threshold?  Do you actually lower their salary to account for the overtime that they will now accrue?   Do you take the “hit” to your profitability and keep their salary the same — plus pay overtime.

The new regulations will unquestionably require businesses to make difficult decisions.  But, following The Process, preparing early, and clearly communicating changes to employees can make the transition less difficult.