The day has finally arrived: after more than three years, the U.S. Department of Labor has issued a new ruling that will raise the minimum threshold for mandatory overtime for certain employees classified as “exempt” under the federal Fair Labor Standards Act to $35, 568 from its current level of $23, 660. Or, to put it another way, from the current $455 per week to $684 per week. Barring any unforeseen legal maneuvering by the courts to delay or halt this action, as we saw in the summer of 2016, this regulation is due to take effect on January 1, 2020. Yes, that’s this coming New Year’s Day, just a couple of short months away.
What does all this mean? In the most simple of terms, it means that an estimated 1.3 million American workers will become overtime-eligible when the clock strikes midnight on New Year’s Eve. Which means that a lot of employees currently earning between $455 and $684 per week will suddenly be earning time and a half for all hours worked over 40 in a given work week, or any hours worked over a certain number in a day, when state laws are considered. This is expected to have a profound impact on organizations both large and small all across the country, and may require significant changes in the way these organizations operate.
So, where does HR play a role in all of this? A wise approach would be to prepare for this change as much as possible before 2019 ends. Research and analysis of an organization’s current workforce, operating budget, wage allocation and other relevant factors would be a proactive first step. From there, engagement of key stakeholders to initiate the planning and decision-making process to mitigate potential issues is key: How do we account for employees working 40 to 50 hours per week (or more) and currently classified as salary exempt, who will be earning time and a half for these extra hours worked? Can we raise the salaries of some or all of these employees to the minimum $684 per week threshold to maintain their exempt status, and therefore avoid overtime pay? Either way, this may require an infusion of new capital or a re-allocation of revenue to meet the expense increase. Or is there another strategy we can formulate and implement?
To prepare for this change will require significant focus and collaboration between HR professionals and the leadership of organizations who wish to “get in front” of this issue before the clock strikes 12 on this calendar year. And there’s no better time to start than right now.