In May 2016, the U.S. Department of Labor (DOL) issued a new rule, effective December 1, 2016, that expands the number of American workers who are entitled to the Fair Labor Standards Act’s minimum wage and overtime pay protections. The new rule increases the salary threshold below which most white-collar, salaried workers are entitled to overtime from the current $455 per week (or $23,660 for a full-year worker) to $913 per week (or $47,476 for a full-year worker).

The DOL estimates that the rule will impact as many as 4.2 million workers who will either (a) get raises to increase their salaries above the new threshold level or (b) get new overtime protections (i.e., spend less time at work). Preliminary data appears to support the notion that women and minorities will perhaps see the most benefit under the new rule.

More Than Half Those Positively Affected Are Women

HR experts say that because of the existing “gender gap,” more than half the beneficiaries of the new rule will be women. Since currently exempt women are more likely to earn lower salaries than their male counterparts, a greater proportion of them will be affected by the rule.

Minorities Will Also See Benefits

Minorities should see positive impact from the rule as well. That is because a disproportionate number of salaried employees currently in the $455 to $913 weekly salary category are minorities.

To Avoid Overtime Pay, Employers Face Two Tests

The increase in the salary threshold is just one of two tests employers face when determining whether they must pay salaried employees overtime. Employers also continue to be subject to the “standard duties test.” Under the test, only positions that meet the DOL’s definition of “executive,” “administrative” or “professional” are exempt from the overtime rules (assuming the employee’s salary is above the threshold noted above).

Small Business Owners Are Complaining

Many small business owners say the new rule hits them the hardest. They point out that when a business is in its formative, early years, managers tend to be somewhat underpaid and overworked. The reward is being present at the ground level – being in a strong position to profit when the business eventually takes off. They say the new rule puts large and small businesses in the same, one-size-fits-all category at a time when the small business tends not to have the deep pockets of larger competitors.

Compliance With Rule Can Come in Several Ways

Labor experts point out that employers have a variety of ways to comply:

  •  Raise a manager’s salary to a point above the threshold. This may be particularly utilized where the employee’s existing salary is just beneath the $48K level.
  •  Re-designate the manager as an hourly worker. This will allow the employer to pay the mandated time-and-a-half overtime for employees who work more than 40 hours during the week.
  •  Reorganize the employer’s labor force. This would allow that the manager doesn’t work more than 40 hours in a week.

Milwaukee Business, Employment, and Commercial Litigation Attorneys

The DOL’s new rules are effective December 1, 2016. They affect large and small employers alike. Many business leaders indicate that they are confused by the rules. They worry about unintended consequences. They share concerns that their human resources practices are no longer in sync with the new requirements. The Milwaukee business litigation firm of Kerkman Wagner & Dunn has more than 50 years of combined legal experience representing business owners in Wisconsin in all sorts of matters, particularly those that involve litigation. We have strong experience with employment issues and understand how the new DOL rule can affect your business. Our firm has big firm talent and provides small firm attention. Call us at 414-278-7000 or complete our online contact form.

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