Clients urged to prep now for DOL’s proposed overtime rule

WASHINGTON — Clients may want to prepare now for a new proposed federal rule, anticipated to take effect next year, that would lift the payment threshold when employees are exempt from overtime.

The administration’s goal is to have the rule finalized and in effect by Jan. 1, said Tammy McCutchen, a principal at Littler Mendelson and former administrator of the Department of Labor’s Wage and Hour Division. “I think [the DOL] has a lot of work to do and they’re not sure they’re going to make that timing, but for sure by the first quarter of 2020,” she said.

Despite the rule not being finalized, clients should still get ready now to make compliance easier, McCutchen advised at the Society for Human Resource Management’s legislative conference this week.

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“Prepare now,” she said. “It’ll take more time than you need.”

The proposed rule, which was announced earlier this month, would raise the salary threshold for overtime eligibility to $35,308 a year. That level is well below the $47,000 ceiling proposed by the Obama administration, which was struck down by a federal judge in 2017.

One of the biggest questions employers will need to ask is who’s going to get reclassified and who’s going to get a salary increase, McCutchen said.

“My big advice [is] talk to lawmakers to get the rule done this year and start working on compliance right now, based on what’s in the proposed rule,” she said. She also added that she believes there will be a brief 60-90 day period for employers to comply, which may be too short.

See also: Employers likely to challenge DOL overtime rule

McCutchen emphasized that the new requirement is based on weekly guaranteed salary, not just the final annual figure.

While the new proposed threshold covers all industries in all regions of the country, state overtime thresholds should be considered as well, McCutchen said.

For example, she noted that New York and California set thresholds above the $35,000 mark, and Alaska and Connecticut have thresholds above the current $23,360 mark, but below the proposed earnings limit. “This is a good compromise that will work in every state without causing job losses,” she added.

Employers may want to evaluate and change their exempt classifications.

“I would pull everyone earning $38,000 and start playing with the numbers to get a list of employees that need to be reclassified versus those that you might just need to do a slight bump in salary,” she noted.

She advised employers to consider other factors when reclassifying employees:

  • Benefit plans: Are some benefits only offered to exempt employees?
  • Timekeeping and payroll: Do employees that might be affected travel, and are there policies in place associated with travel?
  • Communications: Do you have the right communications plan in place to apprise workers about the changes?
  • Training: Do managers know what activities constitute work?
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