The Law @ Work

Limiting Exposure Under the New DOL Overtime Rule

by John S. Gannon

A few weeks ago, I had the pleasure of speaking at a fantastic Lunch & Learn event hosted by the Chicopee Chamber of Commerce.  Along with Jenny MacKay from The Gaudreau Group, we discussed compensation and benefit plan concerns stemming from the US Department of Labor’s new overtime exemption rule.

By now, I’m sure most (if not all) of our readers are aware that the minimum annual salary threshold for exempt “white collar” workers will be going up to $913/week ($47,476 annually) on December 1, 2016.   One topic we discussed at length during the Lunch & Learn was how to compensate employees who will be earning less than $913/week as of December 1.  I outlined three of those options in a previous post:  (1) give raises; (2) convert salaried employees to an hourly rate; or (3) maintain salary basis compensation and pay overtime.  It’s the third option that seems to give employers confusion.  Remember, it’s perfectly legal to pay non-exempt employees on a salary basis; you just need to make sure they are paid an overtime premium when they work more than 40 hours in a workweek.  Plus, you can significantly limit overtime compensation exposure by paying salaried, nonexempt employees pursuant to the fluctuating workweek method (FWW).  The FWW method allows employers to pay some employees an overtime rate that is one-half the regular rate of pay, rather than one-and-a-half times the regular rate.  Stated otherwise, if an employee with a regular rate of $20/hour works 10 hours of overtime, under the traditional overtime rule the employee would be due $300 in additional weekly compensation ($20 x 1.5 x 10 hours) for overtime hours worked.  If the employee is paid under the FWW method, s/he would be due $100 in overtime pay ($20 x .5 x 10 hours), all while retaining the morale boost associated with being a salaried worker.  Talk to employment counsel if you think the FWW method might be good for your business.

Another hot topic during the Lunch & Learn was exempt/nonexempt status misclassification.  Although the new overtime rule does not alter the duties tests for the “white collar” exemptions, this is a good a time to correct misclassification errors that have been lingering for years.  Employees are less likely to scrutinize your reasons for reclassifying them if the changes are made in light of the new overtime rule.

To learn more about strategies for complying with the DOL overtime rule, make sure you attend our Labor and Employment law symposium the morning of September 20, 2016.  Attorneys from the firm will be discussing significant developments in state and federal law, including overtime compliance, the Massachusetts pay equity law, proposed changes to EEO-1 reporting requirements, emerging issues like transgender discrimination, and much more.  Contact Skoler Abbott for more details about the Labor and Employment law symposium.

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