On May 18, 2016, the Department of Labor finalized an overtime regulation that was estimated to affect more than 4 million Americans. Many businesses spent time and money determining how to comply with the new regulation by the December 1 effective date. Then, on November 21, a federal judge in Texas issued a nationwide injunction which prevented the regulation from going into effect. The Department of Labor is appealing the injunction, and the case is scheduled to be heard by the appeals court in February 2017. In the meantime, what does this mean for small business owners, and how could it affect your organization?
The new overtime regulation raised the federal threshold for salaried employees who are classified as “exempt” – meaning, exempt from overtime pay. The previous threshold, which was implemented in 2004, was $23,660 per year ($455 per week). It has been raised to $47,476 per year ($913 per week), meaning most employees who make less than this must be paid time and a half for hours worked over 40 in a work week. The regulation’s effective date, now on hold, was December 1, 2016.
In New York, employers have been subject to a higher minimum salary rate for a number of years. Currently, the minimum salary for New York employees classified as exempt from overtime is $35,100 ($675 per week). New York City minimums may be raised even more for 2017, although the final wage orders have not been announced. Of the two minimums, the higher will control, so the revised federal minimum salary regulation, should it take effect, would supersede the New York minimum salary regulation.
How this may affect small businesses
Many businesses spent time and money during the year determining how to comply with the new federal regulation by the December 1 effective date. Employers must now decide whether to go ahead and implement these changes or await the outcome of the lawsuit. Some speculate that under the new Administration, the Department of Labor will abandon the appeal of the injunction, and that the federal overtime regulation will be permanently enjoined; however, it is impossible to accurately predict what will happen in the legal arena. Employers should assess their own business objectives and the associated risks, and take steps that make the most sense for them.
What are the options? Some organizations are choosing to raise employee salaries to the threshold. If this is not plausible for your company, another option is to make salaried employees hourly and limit overtime. Any changes should be accompanied by a careful review of duties, benefits, and existing work rules to ensure consistent treatment. If you are looking for guidance on which option fits your business best, talk to an attorney at Trevett Cristo today. We are here to support your businesses, and want to see you succeed.