The New Wage & Hour Law: Is Your Company Ready?

Date: August 31, 2016

On May 18, 2016, President Obama and Secretary Perez announced the publication of the Department of Labor’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. The “Final Rule” focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt.

As we approach its December 1 start date, we at the GWCTA will release a series of videos, articles, and seminar events so that you and your business are prepared.  

The New Wage & Hour Law: Is Your Company Ready?

By Brian Muse, LeClair Ryan Law Firm

New regulations issued by the United States Department of Labor (the DOL) will significantly impact how businesses of all sizes must address employee overtime classification issues.  This new regulation makes several changes to existing law, including dramatically increasing the required salary level necessary for an employee to be considered exempt from overtime.   Beginning on December 1, 2016, many employees who have traditionally been treated as “salaried,” or “exempt,” will need to be paid on an hourly basis and be considered eligible for overtime.  This new regulation, one of the most significant changes to wage and hour law in decades, will require careful planning by employers to avoid the penalties and legal liability associated with noncompliance.      

As most employers know, employees are generally classified as either exempt (i.e. the employee works on a salary and does not receive overtime) or nonexempt (i.e. the employee is paid on an hourly basis and receives overtime when he or she works more than forty hours a week).  The new regulation does not change this framework, nor does it alter the existing classifications for exempt employees, including the “executive,” “professional,” and “administrative” exemptions.

Although the classifications for exempt status have not changed, the new regulation increases the minimum salary for exempt employees from $23,660 per year to $47,476 per year on December 1, 2016.  Unlike current law, this salary threshold will also update every three years.  It is anticipated that the necessary salary for exempt employees will increase to $51,168 by the year 2020.  This change is expected to directly impact over 4.2 million American workers. 

This new regulation will create both legal and human resources challenges for employers that do not take proactive steps to address these changes.  Failure to conform can lead to both government penalties, as well as substantial civil claims for back wages and unpaid overtime.  It is anticipated that the Department of Labor will also use these new changes to target employers for other violations, including misclassification based on an employee’s duties.   Employers are strongly advised to address these issues in their workforce prior to the December 1, 2016 effective date.