The DOL Proposed Overtime Rule: Will Your Company Be in Compliance?


overtime working concept

By Tonya Fletcher

Earlier this year, the U.S. Department of Labor (DOL) published a proposed rule that would make nearly a million workers eligible to receive overtime pay. The proposed rule is for white-collar exemptions to overtime, which refers to employees with duties that primarily involve executive, administrative, or professional responsibilities as defined by the regulations.

Currently, employees with a salary of less than $23,660 per year ($455 per week) must be paid overtime if they work more than 40 hours per week. The proposed rule published by the U.S. Department of Labor would raise the salary threshold to $35,308 per year ($679 per week).

It’s important to note that this proposed rule does not change overtime protections for police officers, firefighters, paramedics, nurses, or laborers which include non-management production line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and construction workers.

Overtime regulations can be confusing. In summary, the Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping, and youth employment standards affecting employees. Employees must be paid at least the minimum wage, and are entitled to overtime unless they are classified as exempt. To be exempt from overtime, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If an employee is paid less or does not meet the duties tests, they must be paid one and a half times their regular rate for working more than 40 hours in a workweek.

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It’s important to not wait until the rule is finalized to begin reviewing your practices. Some common mistakes are misclassifying employees, withholding pay, and miscalculating overtime. According to data from the DOL, the most common violators were employers in the retail, construction, and food services industries. Let’s take a look at these common compliance mistakes.

1. Misclassifying employees

An exempt employee means he/she is exempt from the minimum wage and overtime provisions of the law. These positions usually include supervisory or management roles, but can include other roles depending on the industry or specific job duties. To be classified as exempt, the employee must meet both the salary and the duties test, which means they must:

  • Be paid on a salary basis
  • Earn at least $455 per week now, but $679 per week with the new proposed rule
  • Be paid the full, agreed-upon salary for any workweek in which they perform any work

The proposed DOL overtime rule doesn’t include any changes to the job duties that classify employees. Exempt employees aren’t entitled to overtime pay, but can’t be paid less than an agreed upon salary.

Non-exempt employees are entitled to overtime pay. To ensure non-exempt employees are being paid correctly, keep track of all hours worked, pay overtime when applicable, and pay at least minimum wage. Also, remember that a non-exempt employee can receive a salary and still be entitled to overtime pay.

Some states also have requirements that have higher minimum salaries and/or more stringent duties tests than the FLSA. If you have employees in multiple states, you must comply with the FLSA and requirements in each state where employees work.

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