Effective Dec. 1, 2016, new changes to overtime rules will apply to employers and millions of employees in Central Florida and throughout the country. The most significant rule changes in more than 20 years to the federal wage and hour law — the Fair Labor Standards Act — will have a direct financial impact on businesses and white-collar employees such as executive, administrative, professional and computer personnel.
Required minimum salary levels are changing for many in these groups dramatically, from $455 per week (or $23,660 per year for a full-time worker) to more than double that rate, $913 per week (or $47,476 per year).
Changes are also in store for those qualifying as a “highly compensated employee” with total annual compensation increasing 34 percent from $100,000 per year to $134,004 per year. Notably, these new salary rates automatically will adjust every three years, beginning Jan. 1, 2020.
Businesses are faced with a hard choice: substantially increase salaries of the exempt employees who fall below the new minimums or convert them to hourly pay, tracking all hours worked and paying them overtime. In either case, these changes will impact labor costs, potential productivity (if hours are reduced to minimize overtime), employee compensation and, possibly, morale. Because white-collar employees work whatever hours are necessary to get the job done and do not earn additional pay for overtime hours, many businesses may not realize how many hours salaried employees actually work.
For these reasons, in considering what changes to implement, businesses should take four critical steps:
- Identify which and how many employees are impacted by the salary changes.
- Determine the hours these employees actually work, including from home, remote work sites or when traveling.
- Evaluate compliance with the “duties test” applicable to their exempt classification.
- Analyze the financial impact of a salary increase or the new obligation of overtime, and productivity impacts if long hours are reduced or new hires occur to fill in the productivity gap.
These steps will help predict financial and operational impacts, and ready both the business and employees for implementation.
Compliance is critical. Currently, lawsuits filed by employees claiming misclassification or unpaid overtime are at an all-time high in Florida. The new rules may bring an increase in claims by employees or the Department of Labor in its enforcement capacity. Consequences for getting it wrong are significant, including unpaid wages, liquidated damages (a doubling penalty) and legal fees (for your business and possibly the employees who sue). If not correct, it can be a costly mistake.
In short, being proactive and ensuring compliance will help your bottom line.
Helpful resource materials may be found on the Department of Labor’s website (www.dol.gov) and include the Wage & Hour Division’s “Fact Sheets” and Small Entity Compliance Guide, among other tools.
Cynthia Brennan Ryan is a Central Florida attorney who counsels employers in all matters related to federal and state employment laws. She may be reached at cryan@ryan-law.com.
Cynthia Brennan Ryan