Employers Be Prepared: New Rule Affecting Overtime Eligibility Has Been Proposed by U.S. Department of Labor

The Notice of Proposed Rulemaking announced by the Department of Labor on March 7 ,if implemented, will raise the threshold for overtime eligibility so that employees will have to earn at least $35,308 a year ($679 a week)  in order to be exempt from overtime pay for any hours worked over 40 in a workweek. Currently employees must earn at least $23,660 a year ($455 a week).  In addition to meeting this salary test, exempt employees must continue to meet the duties test, which requires that exempt employees must perform work that is executive, administrative, or professional in nature.

It is not too soon for employers to begin analyzing their workforce.  If they have employees currently classified as exempt but making less than $679 per week,  employers will need to decide whether to change their classification to nonexempt (eligible for overtime pay),  or raise their pay above the new threshold (while still making sure that they also meet the duties test).

Some employees currently classified as exempt may welcome the switch to nonexempt so they will be eligible for overtime pay.  Others may resent the change which they may view as taking away their prestige.  If changes to exempt and nonexempt classifications occur, employers should be ready to explain the duties test and the mandatory nature of the classifications.

Although the new proposed rule is likely to be implemented it may be modified or subject to legal challenge, and a deadline for compliance will no doubt be included.

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