Paying Overtime to Managers in 2015?

By
May 4, 2015

We are anticipating the Department of Labor will propose new regulations governing the payment of overtime to employees under the Fair Labor Standards Act. These new regulations, originally promised in November of 2014, will likely change the tests for determining whether or not an employee is exempt from the overtime pay requirements. The result of these new regulations may mean that a number of management-type employees will no longer qualify as exempt and will be subject to overtime pay for work over 40 hours in a week.

While we have not seen the proposed regulations (and they will likely first be issued in February), there are a number of likely changes that are being predicted. The changes include:

  • A substantial increase in the minimum salary amount that must be paid for an employee to be considered exempt from the overtime pay requirements. The current amount is $455 per week, that may be adjusted to as high as $970 per week which would mean the employee would have to receive annual compensation of $50,500.
  • Revision to the rule setting how often the employee must perform the exempt duties (as an executive, administrative or professional employee) with the likelihood that the employee will be required to engage in the exempt duties for at least 50 percent of the time worked.
  • Modification to the duties requirement for the three classifications to make it harder to show that an employee is actually performing duties that would qualify the employee as an administrative, executive or professional employee. 

If some of these changes take place, employers will have a far more difficult time proving that an employee is exempt from overtime pay requirements. This could have a substantial impact on employee costs and profit margins. Companies will need to be very careful in determining the exempt status of employees to avoid lawsuits claiming the requirement of additional overtime pay. As the new regulations unfold, Ruder Ware will keep you advised on how to view compliance with the changes in the FLSA regulations.

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