Watch Out for Drastically Increased Overtime Expenses

A recent proposal from the U.S. Department of Labor would double the minimum salary for the overtime exemption for white collar workers, but would still keep the same complicated duties test in place. As a result, liability for any incidents of misclassification could become significantly more expensive.

At this time, salaried employees must make a minimum of $455 per week (which translates to $23,660 per year) to qualify for exemptions from the Fair Labor Standards Act’s overtime and minimum wage requirements. The proposal from the DOL would more than double that amount to $970 per week (or more than $50,000 per year). This would mean, for example, that an employee making about $40,000 a year and putting in five hours of overtime per week could receive as much as $7,200 in extra salary.

Doing the math

Employers are encouraged to review all current salaried-exempt positions in their organizations to determine who is overtime eligible, and then determine what type of impact these proposed changes would have on personnel costs. Employers might, for example, opt to convert certain exempt jobs to hourly positions and restrict the amount of overtime employees can work. They may also cut back on bonuses or benefits to be able to fund salary increases. Whatever steps employers choose, action is necessary to ensure they do not lose a significant amount of money if these changes are implemented.

Businesses and organizations are also allowed to submit comments to the DOL about their thoughts on the proposed new legislation. To learn more about these potential upcoming changes to overtime exemptions, contact Dallas attorney Steve Kardell at Whistleblower Law for Managers today.