The U.S. Department of Labor recently updated regulations outlining overtime requirements. The restoration industry is not immune from compliance. Here is what you need to know about the changes.

General Wage & Overtime Requirements

Most companies are generally familiar with wage and overtime laws. For those who need a refresher, the Fair Labor Standards Act (FLSA) requires companies to pay “non-exempt” employees at least the federal minimum wage (currently $7.25 per hour – some state and local laws have a higher minimum wage) and pay “time-and-a-half” for work over 40 hours in a week. Whether an employee is “exempt” or “non-exempt” depends upon a number of factors, including, without limitation, what kind of work the employee does, educational and other job prerequisites, and the amount they are paid – job titles given to employees are not the determining factor.
A useful explanation of exemptions is found on the U.S. Department of Labor’s website at Restoration contractors and other employers frequently rely upon on various “white-collar” exemptions excluding certain employees from both minimum wage and overtime requirements. For example, under the current rules, as long as a company pays a properly classified executive, administrative, or professional employee a salary of no less than $455 per week ($23,660 per year), these employees are not entitled to overtime. As another example, properly classified highly compensated employees (i.e. those paid $100,000 or more, with at least $455 payable each week) are also currently exempt.

New Overtime Requirements

The Department of Labor’s new regulations, though few, significantly change prior exemptions. The new regulations:

  • Double the minimum-salary threshold to $913 per week ($47,476 per year);
  • Adjust the minimum-salary threshold for inflation every three years;
  • Change the way the minimum-salary threshold is calculated so that employers can count certain bonuses and commissions toward as much as 10% of the threshold; and
  • Set the total annual compensation requirement for the highly compensated employee exemption to the annual equivalent of the 90th percentile of full-time, salaried workers nationally (i.e., $134,004).

How Employers Can Comply with New Regulations

Penalties for non-compliance can be harsh. The following roadmap will help employers plan for the coming changes:

  • Immediately identify exempt employees whose current salaries fall below the new minimum threshold. Determine who will get a pay raise to maintain the exemption and who will be reclassified as non-exempt.
  • For reclassified, now non-exempt employees, study the employees’ average hours worked for purposes of setting new pay rates to ensure anticipated overtime payments are manageable.
  • Given the likelihood of increased litigation and stepped-up DOL enforcement, consider reclassifying other “vulnerable” positions currently categorized as exempt.
  • Ensure accurate timekeeping of all hours worked by training managers as well as reclassified employees, many of whom will be uncomfortable with or resistant to tracking their hours.
  • Address “bring your own device” issues (e.g., after-hours business e-mails, texts, and phone calls) to avoid “hidden” overtime pitfalls.
  • Review and update company policies and procedures, including policies related to overtime and recording hours worked.
  • Communicate the changes to your workforce.

The DOL’s new rules are effective Dec. 1, 2016. Employers should consult their advisors now to ensure compliance.