Employers Should Prepare for DOL Rules on Exempt Employees and Overtime Effective Dec. 1, 2016

Back in May, I wrote about the newly issued Department of Labor Regulations regarding increased salary thresholds for exempt employees and overtime. In September 2016, Attorney Generals from 21 states, including Michigan, filed suit in the Eastern District of Texas against the United States Department of Labor to block the Fair Labor Standards Act regulations as an overreach of executive authority.

While the suit makes its way through the litigation process, the rules are set to go in effect on December 1, 2016 and employers need to prepare for its impact. While I previously wrote about the threshold increases, the likely result of these regulations will be that more employees will be reverted to hourly, and therefore careful watch on hours worked over forty. These are some common traps to watch out for:

1. The remote worker. Time an employee spends answering emails, working from home are “hours worked,” and while not accounted for when an employee was paid salary, they will certainly be counted when determining if an employee worked over 40 hours.
2. Early birds and night owls. Keep an eye out for that hourly employee that arrives 30 minutes before their start time or stays 30 minutes after their stop time. If these extra before and after work hours are known to the supervisor, and push the employee past the 40 hour work week, the employer will be required to pay the employee.
3. Rate exclusions. When trying to meet the new salary threshold of $47,476 per year, or $913 per week, employers will try to lump in all the extras they can, including discretionary bonuses, gifts, profit sharing, etc. There are number of rate exclusions that do not count toward the salary threshold – make sure your calculations are accurate.

These are just a few traps to look out for, and the Department of Labor regulations provide dozens more examples. If you have a question on how to classify your employees, or if you have fallen into one of the traps, contact me to discuss how we may be able to help.