April Regulations Bring May Rules: Get Ready for New Overtime Requirements

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By Dena Sokolow and Jodi Taylor

The Department of Labor's (DOL) proposed overtime regulations are one step closer to becoming a reality for the construction industry. Once the rule is finalized, an additional five million "exempt" workers will become eligible for overtime. What is the new rule, and how should you prepare?

 

The Fair Labor Standards Act (FLSA) requires that most employees be paid overtime for any time worked in excess of 40 hours in a workweek (employees entitled to overtime are considered "non-exempt" employees). In addition, the FLSA provides strict record-keeping requirements for employees to track their working hours. Employees are "exempt" from this requirement if all three of these tests are satisfied:

  1. The employee is paid on a "salaried basis;"
  2. The employee currently is paid a minimum of $23,600 per year ($455 per week); and
  3. The employee's job duties fall within one of the listed statutory exceptions. 

To qualify for exemption from overtime, all three of these tests must be satisfied. Paying salary alone is not enough. A salaried employee is not the same as an "exempt" employee, although the two phrases are often used interchangeably. While the first and third elements remain the same, the proposed rule raises the minimum salary to $50,440 ($970 a week).  The practical effect - employees who do not earn $50,440/year will now be legally entitled to overtime. In the construction industry, this is likely to hit hardest with onsite supervisors/forepersons and other lower-level managers. 

It is anticipated that the new rule will be published in early to mid-May.  Employers will have (at a minimum) 60 days to comply after the rule is published, so plan to be compliant by mid-summer.

What Should We Do Now?

Now is the time to start preparing.

  1. Identify employees who will need to be reclassified from exempt to non-exempt, i.e., exempt employees earning less than $50,440.00/year. Look closely at forepersons, site supervisors, lower-level superintendents, etc.  These individuals may not meet the salary threshold, but likely work more than 40 hours each week.
  2. Determine the number of hours the employee works.
  3. Analyze the financial impact. Will you raise pay to new threshold level, reclassify as nonexempt and pay overtime, or lower pay to offset overtime requirement? Consider how pay changes or other changes in job assignments may impact your organization.
  4. Review exempt tasks to see if they need to be reassigned or maintained with the current position.
  5. Develop administrative plans to ensure compliance when the regulations become official, including training and timekeeping processes for newly classified non-exempt employees.
  6. Lastly, don't hesitate to seek legal help to ensure compliance and help maneuver through the DOL regulations and classification changes. These rules are complex, and there are serious financial consequences if you are found to be in violation of them. Once the rule is finalized, the DOL will send out its auditors to ensure employers are in compliance.

Dena Sokolow is a shareholder in Baker Donelson’s Tallahassee, Fla., office, where she brings more than 20 years of experience counseling and defending employers and management on a wide range of labor and employment matters. With a practice spanning the Southeast, she partners with clients to best position them to avoid employment law claims or, at a minimum, put the company in the strongest position to defend such claims. She may be reached by e-mail at dsokolow@bakerdonelson.com.

Jodi Taylor is an attorney in Baker Donelson's Atlanta office, where she combines her experience in employment and construction law to counsel clients in the construction industry on employment issues facing the construction industry.  She may be reached by e-mail at jtaylor@bakerdonelson.com.

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