Recently, the U.S. House of Representatives voted to delay the Obama Administration’s revisions to the overtime exemption rules that were scheduled to go into effect December 1, 2016 until June 1, 2017. On May 17, 2016 the Obama Administration released their Final Rule to the Fair Labor Standards Act (FLSA). The key update will be to the overtime exemption for full-time employees which will double the annual salary limit from less than $23,660 to $47,476, under which 4.2 million Americans would qualify for overtime pay. Currently, only 7 percent of full-time workers qualify for overtime pay.
In addition to expanding the salary eligibility for overtime, the final rule will automatically update the salary threshold every three years, based on wage growth over time. On the date the Final Rule goes into effect, the standard salary level will be raised from $455 to $913 per week and the highly compensated employees (HCE) total annual compensation requirement from $100,000 to $134,000.
The Final Rule was criticized by restaurants and small business groups that argued that the original laws did not intend to set a salary threshold as a primary means of determining who is eligible for overtime pay and who is not. Some also claim that the new updates place an unconstitutional infringement on states’ rights by dictating the pay scale states must use to compensate employees. According to The Hill, Rob Green, the executive director of the National Council of Chain Restaurants (NCCR), stated that the regulations do not take cost of living differences into consideration, as it varies from state to state.
The Hill also cited House Majority Leader Kevin McCarthy’s (R-Calif) argument that the regulations would prompt employers to cut employee hours, reducing their gross pay. Mr. McCarthy stated that delaying the new regulations to the overtime exemption rules would give employers and employees more time to adjust.
As mentioned in a previous article, businesses have a few options to meet the new overtime rule standards. According to Restaurant Business, The Good Times, a fast-food burger chain, announced in August that it plans to turn its salaried managers into hourly employees. Aside from changing salaried employees to hourly, business owners may raise worker salaries to maintain white-collar exemption, pay those who work more than 40 hours a week their current salaries with overtime pay, adjust work hours and wages, spread out work hours or reorganize workloads.
Navigating the complexities of regulatory compliance that affect business practices can be challenging. It is important that business owners consult an experienced New York business law attorney that can advise them on how to stay in compliance with the law and avoid fines. Contact the experienced business law attorneys at Blodnick, Fazio & Associates by calling (516) 280-7150.