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Client Alert — Overtime Rule Changes – Urgent Update 3-18-16

March 18, 2016

Overtime Rule Changes – Urgent Update

As communicated in the past, the Department of Labor has proposed that the White Collar exemption salary threshold of $23,660 be increased to $50,440 per year. Due to the significant impact on SESCO clients and employers across the country, we've been closely monitoring this development.

The latest development is that the Department of Labor (DOL) forwarded its final overtime rule with the proposed increase in the guaranteed salary basis to the Office of Management and Budget (OMB) and Office of Information and Regulatory Affairs (OIRA) for review on March 17. This completes the last mandatory step that the DOL has to take before issuing the final regulations. Based upon this action, it's possible that the overtime rules could come sooner than the expected date of July/August of 2016, with a release in April or May followed by a 60 or 90-day implementation period. The final rule may also include changes to the "duties test" that define the types of positions who must be paid overtime.

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

  • Review your current salary-exempt incumbents and simply identify those who make less than $50,440.
  • 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 ACA, benefits or other and not reference Department of Labor.
  • Over several weeks and months, determine whether or not these incumbents who make less than $50,440 work in excess of 40 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, $50,440.

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 (150%) over 40 or SESCO's recommended Fluctuating Workweek Method of Payment which is a guaranteed salary pay plan with half-time (50%) 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 to the Department of Labor regulations, but also ensure that it is properly implemented and communicated to staff so that there is no confusion.

Other SESCO initiatives include:

  • SESCO Compliance Publication How to Comply with Wage and Hour Regulations ($35.00 for retainer clients / $55.00 for non-retainer clients). Contact SESCO to order.
  • SESCO will be scheduling with clients and client associations a one-hour teleconference which will be provided at no charge covering basic Wage and Hour regulations as well as SESCO staff recommendations on not only how to comply with the new rules, but optional pay plans.
  • All retainer clients receive an annual Wage and Hour/HR compliance assessment. We will be scheduling these audits with clients over the next few months as requested to assess compliance and practices.
  • If you are not a SESCO retainer client, simply call or email us and we'll be happy to discuss our monthly Service Agreement.

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