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DOL Releases Final Overtime Rules

Posted on Thursday, June 02, 2016

Time & Attendance Software | DOL Releases Overtime Rules | Time Rack

For months, companies and their human resources and benefits teams have waited with bated breath to hear the U.S. Department of Labor’s final decision regarding overtime exemptions updates.

These changes will most likely have a large effect on businesses, as they may be required to provide additional pay and benefits to more people depending on the final regulation. The day has finally come as the DOL has announced the conclusive regulation. Time Rack® has a closer look at the alterations to the Fair Labor Standards Act overtime guidance.

The old rule

The last update to the DOL's stance on overtime pay was in 2004. That regulation stated that workers who made $455 per week or $23,660 per year or more were not eligible to receive additional compensation for overtime hours. Employees who made less than those caps were qualified.

The final overtime rule will result in the reclassification of certain workers.

The new regulation

The DOL proposed an increase to the overtime rule in 2015. The agency wanted to bump the threshold to $970 per week or $50,440 per year. Employees making less than those standards would be eligible to receive overtime compensation.

After months of deliberation, the DOL's final ruling is slightly different. Effective December 1, 2016, the new overtime cap will be $913 per week or $47,476 per year. These figures essentially double the former ruling.

Now that the final ruling has been released, it’s crucial for organizations to reexamine their employee roster. Formerly, some companies may have offered different benefits options to exempt versus nonexempt employees. With the DOL's alteration, certain workers will be reclassified. HR and benefits teams will need to consider how this update will affect their worker offerings, as well as their budgets.

“Despite the alteration to the overtime rule, the duties test will remain the same.”

Duties test remains unchanged

To help employers determine overtime eligibility, the DOL introduced duties tests in the past. These assessments examined the job responsibilities of certain workers to evaluate whether they were qualified to receive additional compensation. The new federal ruling focuses on the levels necessary for white-collar employees to be exempt. There are three distinct classes that businesses should be aware of.

Professional, administrative and executive workers who meet – or exceed – the DOL's overtime threshold and also satisfy specific rules according to the duties test will be exempt from additional compensation. For example, executive workers who have the ability to hire or fire other workers – while also meeting the overtime salary cap – would not be eligible to receive overtime.

Originally, the DOL suggested making changes to the existing duties test. The agency decided, however, to keep the assessments as is. In fact, the DOL believes the change to the overtime threshold will actually reduce the amount of workers who will be subjected to the duties test in the future.

Upcoming alterations

The DOL's final ruling also puts a mechanism in place for automatically updating the salary threshold and compensation levels moving forward. Starting January 1, 2020, there will be standard changes every three years.

While many people are excited about the altered FMLA overtime ruling, certain company members worry about what the change will mean for benefits and budgets. Certain employees who were once exempt will be reclassified, and their employers will face important decisions regarding what offerings will continue depending on status. It’s critical for organizations to make their workers aware of this update and to begin planning for the change before it is completely implemented in December of this year.

Companies can utilize Time Rack® time and attendance software to track employee hours for overtime calculations. The cloud-based solution offers efficiency and effectiveness for businesses looking to plan for the future.


Contact us to learn more about the DOL’s new FLSA overtime rule