Regulatory Update: Navigating the Changes to New Overtime Rules
On May 18, 2016, the federal government announced changes to the existing overtime regulation. This change will impact employees who are eligible for overtime pay, and may require businesses to make changes in how they pay or schedule certain employees. This change is expected to impact 84,000 workers in Massachusetts.
The information below is intended to help you better understand these changes. Because this is such an important issue, the North Central Massachusetts Chamber of Commerce will be hosting a workshop on this topic. For more information on that workshop, click here, or read more below.
Understanding the change
Under the new regulation by the United States Department of Labor, most salaried workers earning up to $47,476 a year must receive time-and-a-half overtime pay when they work more than 40 hours during a week. The previous salary threshold for overtime pay was $23,660. The changes are expected to either see employees’ salaries rise above the new threshold, or workers below the new threshold working fewer hours during the week.
Who is entitled to overtime?
Employees who are are entitled to overtime under the Fair Labor Standards Act have traditionally been considered non-exempt employees. Employers must pay these workers overtime pay when they work more than 40 hours in a week. There are some exemptions to the Fair Labor Standards Act that classifies workers as exempt employees. These employees are administrative, executive, professionals, or outside sales staff. These employees are exempt from required overtime pay.
Exempt status can usually be determined by testing whether or not an employee spends most of their time in a decision making role. Because this test is open to interpretation, the salary threshold is another standard in determining overtime eligibility. So even employees who are legitimately in management positions or in decision making roles are still eligible for overtime pay if their salary is below $47,476 – under the most recent rule change. Teachers, doctors and outside sales representatives continue to be exempt from overtime pay requirements.
The new regulation will go into effect on December 1, 2016. Part of the new regulation calls for the overtime salary threshold to be updated every three years to keep up with inflation. At this point, it is recommended that employers assess their organizations, especially exempt employees who earn less than $47,476. There are several considerations that can be made like reclassifying workers, shifting duties or responsibilities, and increasing pay to meet the threshold.
Possible Congressional Response
There are several potential actions Congress may take to block the new regulations, which include 1) adopting a resolution of disapproval under the Congressional Review Act; 2) enacting specific legislation, such as the Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773), which would overturn the proposed rule; or 3) attaching a rider to an appropriations bill to block enforcement of the rule for a year. However, any action by Congress to overturn the new regulatory changes are unlikely to be successful since it is expected that the President would veto any of these measures and it doubtful that there are sufficient votes (two-thirds in both the House and Senate) to override any Presidential Veto.
Chamber Workshop on New Regulations
In an effort to help members better understand the impact of the new overtime rules and to help prepare for them, the North Central Massachusetts Chamber of Commerce is hosting a special edition of its HR Council on Wednesday, June 15th from 12:00 p.m. to 1:30 pm Great Wolf Lodge, 150 Great Wolf Drive, Fitchburg MA. Employment attorney Corey F. Higgins of Mirick O’Connell will discuss the new overtime rules. The cost is $20 for members and $30 for non-members. To register, please click here or contact the Chamber at 978-353-7600 ext. 235.