For many HR professionals, corporate executives, and business owners the latest proposed changes by the Department of Labor (DOL) to the existing overtime regulations may cause some sleepless nights. The proposed regulation will detail how employees should be classified – as either exempt (salaried and ineligible for overtime pay) or non-exempt (hourly wage earners eligible for overtime pay) based on the proposed salary threshold ($970 week or $50,440 year, in 2016). Employers may be required to pay overtime for employees who were once ineligible for overtime pay. The additional cost of employee wages for employers may cause a burden to those businesses with narrow profit margins. Larger companies with larger profit margins may be able to absorb the additional cost. However, smaller companies may offer lower wages to mitigate the increase in the cost of wages but consequently, may run the risk of not retaining their talent.
The DOL provided only 60 days for public comments on the proposed changes to the 541 overtime regulations. Despite over 600 organizations (including SHRM) and individuals requesting additional time for comments, the comment period closed as scheduled on Friday, September 4, 2015. According to regulations.com’s portal, before the comment period closed, the portal collected over 245,000 comment letters. All comments must be reviewed by the DOL prior to publishing the final ruling.
During the comment period, SHRM and other interested individuals were very vocal on the issue. In addition to SHRM and its affiliates compiling a consolidated comment letter expressing their concerns over the proposed regulation, SHRM also created a portal where its members sent over 800 letters to the DOL and approximately 3,000 letters to Capitol Hill regarding the proposed changes.
SHRM published some of their key concerns that pertained to the proposed salary threshold as well at the potential for changes to be made to the duties test. According to SHRM, the proposed threshold is more than 100% increase to the current threshold making its impact significant and extended to almost all workplaces. In addition, SHRM believes that the methodology the DOL used to calculate the newly proposed threshold was improperly administered. Small to mid-sized companies or lower wage earning regions may not be able to operate as they do now in the very near future. Lastly, although the DOL did not propose changes to the duties test, they did ask for input regarding if the duties test should require updates. In addition, SHRM posts that if and when the DOL decides to amend the duties test, that the DOL is legally bound to publish the proposed changes and to submit to the public for the public’s review and comments.
I have said all of this to say, be sure to stay abreast of this topic and to anticipate the final regulation to be communicated and enforced next year. Companies’ executives, HR professionals, decision makers, managers, and business owners should be proactive in reviewing job descriptions, salaries, total compensation packages and computing various scenarios to see what will work best for their individual companies. Be forthcoming with employees about pertinent information that may impact them to foster transparency and trust as you work through this adjustment that will soon be at the forefront of almost every workplace.
For additional information, updates, and guidance on the proposed overtime changes, visit www.dol.gov/ or www.shrm.org.
If you would like to discuss your company’s or business’ personal issue with the newly proposed overtime changes, we would welcome the opportunity to work with you. Please complete our contact sheet at http://www.smarterhrsolutions.com/contact-us/ and we will contact you within 24 hours.
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Nicole Bellow, DBA-ABD, MBA, SPHR, SHRM-SCP
Smarter HR Solutions, LLC.