To-do List in Response to Proposed Overtime Rule

Instead of waiting for the Department of Labor (DOL) to finalize the proposed overtime rule, employers can take initial steps to prepare for the changes.  These initial compliance steps may help the employer. 

Initial Steps 

-          Identify the exempt positions with salaries that fall below the proposed salary threshold of $50,440 per year or $970 per week.

-          Decide whether to have a zone which employees close to the new threshold will get bumped up to maintain exempt status, or

-          It is necessary to clearly define the hours a week for employees who will be reclassified.  Employers will be able to model pay with reasonable accuracy going forward.

-          Determine the approach to settle nonexempt pay rates.

-          For employees who are subject to the highly compensated standard, but below the proposed pay level (Between $100,000 and $122,148 per year), determine whether or not these positions satisfy the full duties test of at least one exemption, as opposed to the relaxed duties standard applicable for highly compensated employees.

-          You should consider to reclassify other positions to manage risk and enhance compliance.

 Long and Short Tests 

The days of long and short tests may be returning, so employers should re-familiarize themselves with the tests in case the Department of Labor reverts to using them again.  These tests which were used from 1949-2004, in which a long test was applied to employees paid a lower salary, and a short test where employees were paid a higher salary.  Under the long test, exempt employees could not spend more than 20% of their time on nonexempt activities, unless they were retail and service workers.  The DOL’s salary threshold increase is intended to make a return to these tests unnecessary. 

 Potential that DOL might back down

 Employers should also prepare in the event that the DOL decides to back down from some of its doubling of the salary threshold for exempt employees.  Instead of the proposed salary level of 40th percentile for full-time employees, the DOL may settle for lower around the 35th or 30th percentile ($44,304 and $40,196 per year).  Employers would be recommended to analyze which employees fall below these thresholds, to prepare themselves if the DOL changes.