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Changes to regulations for overtime payments under the Fair Labor Standards Act, which go into effect Dec. 1, set the salary threshold for exemptions under to $913 per week, or $47,476 annually, for a year-round, full-time worker and the compensation for highly compensated employees at about $134,000. (Photo Illustration/Thinkstock)
White-collar workers across the country will see a change in how their employers compensate them and handle their hours starting Dec. 1, when changes to the Fair Labor Standards Act will extend the right to overtime pay to an additional 4 million workers.
At face value, the rule changes are fairly straightforward and fall under three categories. They set the salary threshold for exemptions under the FLSA to $913 per week, or $47,476 annually, for a year-round, full-time worker and the compensation for highly compensated employees at about $134,000. The rule also will automatically adjust salary and compensation levels every three years to keep them in line with salary levels.
The U.S. Department of Labor last updated the regulations in 2004, when exemptions began if an employee had a weekly salary of $455, or less than $24,000 annually.
Christine Walters, an independent consultant with FiveL Company, a human resources firm in Westminster, has been working with businesses to help them understand how to be compliant with the new law.
“From an employee-relations standpoint, employers need to start sooner rather than later talking to employees who will be converted to non-exempt about what that means,” said Walters.
Potential changes may include employees having to keep track of their hours, restrictions on how employees can use paid leave and possible fluctuations in paychecks, she said.
No matter which option companies take, it will take time for employers to take stock of their employees’ compensation and hours they work. In some cases, it might make sense to give employees below the salary threshold a salary bump, while in other cases it may make more sense to restrict their schedules to 40 hours per week.
In Maryland, employees must be notified of wage adjustments within one pay period before the change.
“Employers need to bear that in mind if they’re going to make wage changes that impact their employees,” said Julie Janofsky, an employment law attorney at Fedder & Janofsky LLC in Baltimore.
Janofsky has been working with businesses and employees to make sure the FLSA change is implemented correctly and before the Dec. 1 deadline.
“Businesses that are going to have the most trouble with this law are businesses with a lot of office workers and restaurants that have people categorized as managers but make less than $47,000 a year,” said Janofsky.
Janofsky has found that many businesses are not aware of the law.
“It’s a problem since it impacts so many businesses in the United States,” she said.
Moving too fast?
The new regulations are for workers that fall under administrative and executive exemptions. The rule does not cover doctors, lawyers, teachers, heavy truck drivers and other categories of exempt employees.
The business community and human resource specialists have argued that the speed at which the new rule is being implemented will derail businesses.
Julie Janofsky, a Baltimore employment law attorney, has been working with businesses and employees to make sure the changes to overtime payments under the Fair Labor Standards Act is implemented correctly and before the Dec. 1 deadline. ‘Businesses that are going to have the most trouble with this law are businesses with a lot of office workers and restaurants that have people categorized as managers but make less than $47,000 a year,’ she says. (File photo)
“I think it’s too much, too fast, with the more-than-100 percent increase in the minimum salary threshold,” said Walters, who testified before the U.S. House Committee on Small Business on the impact of the new rule. “That is before perhaps there has been enough time to conduct proper economic studies particularly on small businesses and nonprofits.”
Several efforts are underway to slow down the implementation of the new rule, including six bills pending before Congress. Organizations including the Society for Human Resource Management’s national chapter and ten affiliated chapters in Maryland have asked the state’s 6,000 members to send letters supporting a delay.
The U.S. Chamber of Commerce is taking the Department of Labor to court over the rule, arguing that it contradicts Congress’ “intent for executive, administrative, and professional employees to remain exempt from overtime pay” and that the automatic, three-year salary exemption increase goes against the standard rulemaking process.
The organization estimates the rule change will costs businesses $1.2 billion annually to stay complaint.
“At the Chamber, suing is always the last resort,” chamber President and CEO Thomas J. Donohue said in a statement announcing the litigation. “In fact, the Chamber and its federation of state and local partners made good faith recommendations to DOL before the rule was proposed. Our advice was ignored.”
Despite objections to the rule, the consequences for not complying are severe. Both the state and the federal governments have authority to enforce the law, as overtime claims in Maryland are covered under the state’s wage payment and collection law, said Janofsky. Employees in Maryland can also file suit over rule violations and seek treble damages and attorney’s fees, something employees in other some other states cannot do.
“Employees are likely to have many more claims under this law because it captures a larger segment of the workforce than the old regulations did,” said Janofsky.
