Today, May 18, 2016, the United States Department of Labor (the "DOL") announced that it is increasing the salary threshold for positions exempt from overtime from $23,600 to $47,476. If you have any employees currently classified as exempt from overtime who are paid less than $47,476 on a salaried basis, you will be required (1) to keep time records for all hours worked and (2) to pay that employee overtime if he or she works 40 or more hours in any given week. The new rule becomes effective December 1, 2016.
As you may know, the starting premise of the federal Fair Labor Standards Act ("FLSA") is that all employees must receive overtime pay if they work 40 or more hours in any given week. In addition to satisfying the salary threshold, an employee also must satisfy a duties test to be exempt from the overtime requirement. The most common duties tests include the professional, executive, administrative, computer, and outside sales exemptions, each of which has detailed criteria that must be met. Employers also must ensure compliance with applicable state laws.
With a significant uptick in wage and hour litigation – particularly collective and class actions – employers cannot ignore compliance with this important requirement. If an employee can prove that he or she should have received overtime pay, an employer may be liable for double damages as well as attorneys' fees and costs. Plaintiffs' lawyers are eager to handle these mass-volume cases, and the DOL also has been particularly active in conducting random audits and in investigating employee complaints.
Employers should be prepared to respond to employee inquiries about this new law, and to take immediate steps to adjust their compensation practices. An employer might want to consider raising the salary of an employee who is close to the $47,476 threshold and who otherwise satisfies one of the duties tests to at least $47,476, thereby maintaining the employee's exempt status. Another option is to begin keeping track of the employee's time and pay the employee overtime for the hours over 40 worked in any given week. Looking the other way is no longer a viable option. Lowenstein Sandler LLP's employment law attorneys are experienced and knowledgeable about wage and hour compliance and would be pleased to provide legal counsel if you have questions.