United States: Employment Lawyer Updates Options For Compliance With New DOL Overtime Rule

Last Updated: November 15 2019
Article by Elaine Mohre

As the Business Journal reported last month, the U.S. Department of Labor will implement a new overtime exemption salary threshold this coming January, and a local attorney is sharing additional guidance on how to comply.

On Sept. 24, the DOL announced its rule updating the minimum salary level required to exempt executive, administrative or professional employees from overtime, a move that will make about 1.3 million more American workers eligible for overtime pay under the Fair Labor Standards Act, as the Business Journal reported Oct. 4.

Effective Jan. 1, the threshold for exemption of eligible employees from overtime pay for hours worked past 40 per week is $35,568, up from the $23,660 in effect since 2004.

In terms of weekly pay rates, the threshold change is from $455 to $684 per week.

The new rule came after the DOL under President Barack Obama’s administration in 2016 sought and failed to raise the overtime exemption threshold to $47,476 per year — a move which would have made about 4.2 million more U.S. workers eligible for overtime pay.

Mark Smith, a human resources and employment law attorney at Rhoades McKee, said the short implementation timeframe means employers should take “prompt action” working with legal counsel to consider their options and choose a means of compliance.

He told the Business Journal last month that employers with salaried workers whose pay falls below the threshold would have two options: raise the affected employees’ salaries above the threshold or convert them to hourly workers and pay them overtime for hours worked past 40 per week.

But he said in a recent legal alert to clients that those two options are “more complicated than they appear at first glance,” involving perhaps more expense and certainly more work.

That’s why he added a third option to consider: Leave the formerly exempt employees on a salary that is nonexempt from overtime.

He said under this option, “The employer and employee agree how many hours the fixed salary represents. The number of hours can be fewer than, equal to or greater than 40 hours per week. The salary can be any sum if the amount, when divided by 40 hours, equals or exceeds the minimum wage which, in Michigan, increases to $9.65 per hour effective Jan. 1. Using this option, employees are only paid the salary for actual hours worked and are paid overtime for hours worked over 40.”

He provided a couple of examples of how this could work, all of which would involve the employee keeping track of hours worked:

Salary based on 40 hours per week: Say the employee used to receive a salary of $32,000, which equates to $615.38 per week or $15.38 per hour. If the employee works fewer than 40 hours, $15.38 would be multiplied by the hours worked. If more than 40 hours, the employee would receive $23.07 for each additional hour, or 1.5 times the base rate. If the employee never exceeds 40 hours, the annual pay would be the same $32,000 that was paid in the past.

Salary based on 45 hours per week: Say the employee used to receive a salary of $32,000, which equals $615.38 per week, or $13.67 per hour. If the employee works fewer than 40 hours, $13.67 would be multiplied by the hours worked. If the employee works the scheduled 45 hours, the $615.38 would be paid, plus the employee would receive half-time pay of $6.83 per hour for the hours worked between 40 and 45, resulting in an extra $34.17 per week. Hours worked beyond 45 would be paid at the rate of $20.50 per hour, or 1.5 times the base rate. If the employee works only 45 hours per week, he or she would receive $33,777.10 per year — $32,000 base rate, plus $1,777.10 in overtime — which is still below the new salary floor.

Smith said this third, two-part option, while involving a bit more math, could be less likely to draw the scrutiny of the DOL for possible misapplication of the rule and also less likely to attract resistance from employees facing perceived demotions from salaried to hourly.

Whatever route employers choose to go, Smith noted companies that don’t comply and pay overtime to eligible workers will be liable for the amount that should have been received, plus attorney’s fees and an additional amount as a penalty during a lookback period of three years.

“Given the well-publicized nature of the new regulations, employers who get it wrong may well face three years of damages,” Smith said. “Depending on the number of employees involved, the exposure to damages can be significant.”

Originally Published by grbj.com

By: Rachel Watson

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions