Barring last minute court intervention, the Department of Labor’s new rules on overtime pay for “white collar” jobs go into effect July 1, raising the threshold for salary exemptions for required time-and-a-half overtime beyond a 40-hour workweek.
The salary threshold for exempt employees — mostly those in professional roles — goes up from $35,568 a year currently to $43,888 starting July 1. Those thresholds will go up again in January, if legal challenges fail.
“There are employees who currently meet the threshold and are exempt from overtime. Now they are going to be in a position where an employer is either going to have to increase their salary to meet the new threshold, or convert them to nonexempt and they would be entitled to overtime,” said Darla McClure, a business law attorney at Rockville, Maryland-based Stein Sperling.
The change means thousands of businesses have a decision to make about employees currently exempt from overtime rules.
“They are just going to have to say, ‘I am not going to do the increase and I am going to keep you at 40 hours,’ which could be quite stressful for some employees who need additional time to get their work done,” McClure said.
Some companies may choose to raise salaries to meet new thresholds for OT-exempt employees who typically work more than 40 hours per week, if the higher salary would offset the increase in pay from overtime.
Salary threshold is one of two deciding factors in whether or not an employee is exempt from overtime rules. The other is duty, or what the job entails. There are three categories: management, administration and professional.
“If you’re going under the executive exemption, then you have to be managing the enterprise or a department. You have the ability to hire and fire, that sort of thing. You need those duties for that specific exemption, and there are different ones for administrative and professional exemptions,” McClure said.
Several lawsuits are being heard by courts challenging the new overtime rules, filed by trade groups representing those industries most affected, including restaurants, retail and construction.
No rulings are expected before the July 1 change; however, the threshold is scheduled to increase again on Jan. 1 to $58,656 a year, giving those legal challenges six months to be heard.
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