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Effect of proposed overtime rule changes

By Jeremy York, HR Field Representative, Synergy

In June, the Department of Labor (DOL) announced proposed changes to the Fair Labor Standards Act, which outlines overtime exemptions for white-collar workers.

The proposed changes would extend overtime protections to nearly five million workers within its first year of implementation, making many positions that are currently considered overtime exempt under the act, nonexempt and eligible for overtime.

Last year, for example, staff members of a Downtown nonprofit each worked an average of 55 hours a week with annual salaries of $40,000. This organization has 35 employees. Under the changes, this nonprofit’s staffing budget would rise approximately 56 percent, an additional $22,500 in overtime for each staff member or a total of more than $787,500.

This proposed change could be a costly one for employers, especially nonprofits that already operate on slim budgets.

One of the proposed changes to the current law includes raising the salary minimum of exempt status from its current $455 per week ($23,660 per year) to $970 per week (50,440 per year). This means that under the proposed changes that in most all cases an employee would need to earn at least $50,440 per year to qualify for exempt status and ineligible for overtime.

Exceptions to this would include outside sales, teachers, doctors and lawyers. However, for most general business positions this ruling would apply.

Another proposed change is related to the performance of the primary duties of the job. Currently, there is no specific time an employee has to spend performing the primary duties of his or her job to qualify as exempt — it is to be used as a guide but it is not determinative. The proposed rule specifies that an employee must spend 50 percent or more of his or her time performing the primary duties of the job in order to qualify for the overtime exemption. This is a rule currently in place in California and the DOL seeks to adopt it.

There are many other proposed rule changes but the above are just a couple that are sparking attention.

You can view the detailed rule change proposal at http://www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf.

The good news is that the DOL is seeking feedback on its proposed changes during the current public comment period through September 2015. Once the comment period ends, the DOL will review all feedback and work to finalize changes.

Based on historical decision-making data, we can expect to see final rules around second quarter of 2016.

In the meantime, employers should stay up to date on developments regarding the proposed changes and evaluate its workforce.

Currently, Synergy is working with its clients to plan ahead by:

  • Understanding how these changes may impact company culture and employee morale.
  • Encouraging FLSA audits to identify the impacted with the proposed changes.
  • Developing actions plans on how to implement changes when they occur.
  • Identifying methods to reduce overtime for those roles that were previously exempt from it.

Thankfully, these are just proposed rule changes at this time but the DOL is very clear that changes will be made.

Unfortunately the specific changes won’t be known until sometime next year.

JeremyYorkJeremy York, SPHR, SHRM-SCP, is a Human Resources Field Representative for Synergy PEO Services.  With over 15 years experience, he provides strategic and generalist HR support to local nonprofit organization leaders and their staffs. Jeremy has a bachelor’s degree from Purdue University in Organizational Leadership and Supervision and a master’s degree from Indiana Wesleyan University in Management. He is the current director of certification for the Indiana State Council of the Society for Human Resource Management (SHRM) and serves on the IndySHRM board of directors as the past president.

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