Last July, the Department of Labor issued a proposed set of regulations outlining a number of changes to the overtime exemption requirements for employers. After the notice and comment period ended in September, the Department began drafting a “Final Rule.” As of mid-January 2016, the Department was still in the drafting phase. While the proposal provides some insight into the new regulations, employers are still left to guess the specifics of new rules that will impact an estimated 4.6 million workers.
What we know for certain is that the Final Rule will be published sometime in 2016, and there will be at least a 60-day implementation period to allow employers the opportunity to come into compliance with this significant change. However, even a 60-day implementation period may be nightmarish for many large employers.
Indeed, the Department estimates at least three direct costs to employers as a result of the upcoming change: (1) regulatory familiarization costs; (2) adjustment costs; and (3) managerial costs, which will total between $239.6 and $255.3 million per year. To offset these expenses, employers should immediately begin to audit their entire range of employees currently earning less than $50,440 a year. If the Final Rule is published as proposed, any employee earning below this amount will be entitled to minimum wage and overtime. An additional hedge on liability will include the implementation of arbitration agreements for the potentially effected employees.
Employers should also assess those employees who earn more pursuant to the new regulations as well. The proposal will also seek to clarify job duties that may continue to be exempt above the threshold salary, and without knowing exactly what the Final Rule will be, using the old job duty parameters will serve as a good baseline for beginning an internal analysis.