Final Overtime Ruling: How Does It Affect Your Business?

The final overtime ruling was issued back in May of this year by the federal government regarding salary requirements for exemption status. Under the Fair Labor Standards Act (FLSA), overtime exemptions for executive, administrative, and professional employees is based on a minimum salary requirement (among other factors such as time spent on certain tasks, managing others, and much more). Usually, California labor law is more generous to employees than the federal law, but as it stands now, the federal law is actually more substantial. Which means California employers must follow the federal standards of $913 per week or $47,476 per year in order for an employee to be classified as exempt under these categories. The final ruling becomes effective as of December 1, 2016 so make sure you are in compliance with this, and perform the necessary classification studies and exempt/nonexempt status reviews before the deadline or your organization can face hefty fines for noncompliance. Follow this link for more information from the Department of Labor: https://www.dol.gov/featured/overtime.

If I haven’t completely bored you to tears with the nitty gritty on this topic, here’s a few basics that we can all benefit from learning in terms of how this actually applies in the workplace in our day-to-day lives.

1. The salary cap for overtime pay will be doubled! So this means a lot of people will likely be affected by the change. Make sure you review your employee exempt status ASAP.
2. Consider the pros and cons of giving some of your employees a nice raise…in order to keep them in the exempt status that makes them ineligible for overtime pay.
3. Consider the effect of changing hours for these employees in order for your company to stay in compliance. Cutting hours may sound like a solution from the employer’s perspective, but consider how that could result in turnover or other potential issues for your organization if employees are unhappy with the results of those changes.
And here’s an interesting fact for you to consider. According to @YahooFinance, “Since 1975, the share of workers who qualify for overtime pay has plummeted from 62% to 7%, according to the U.S. Department of Labor. With the new rules, 35% of workers will be eligible.” Time will tell if these new numbers will impact the workforce as expected. Stay tuned in to your favorite HR blog (that’s us, by the way!) for updates as this unfolds.