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The New Overtime Proposal: What You Need to Know

On June 30th, President Obama announced that the Department of Labor had developed a proposal for extending overtime pay to millions of American workers. Exempt workers previously only qualified for overtime if they earned $455 a week/$23,660 annually or less. Under this new proposal, that threshold will be raised to $970 a week/$50,440 annually or less. The White House and the Secretary of Labor believe this will extend overtime pay to almost 5 million more workers in the United States.

Unless you do business within certain industries that fall under specialized pay laws, your employees are likely classified as either non-exempt or exempt under the Fair Labor Standards Act (FLSA). Non-exempt employees must be paid for overtime, while exempt employees usually do not if they earn more than the established pay threshold. Exempt employees usually fall into three categories: administrative, executive and professional. If your employees don’t fall into at least one of these categories, they are non-exempt and, if eligible, must be paid overtime. Many managers on the front lines of small businesses are often classified as exempt under the executive classification, as managing other employees is documented as their primary duty and therefore have not been eligible for overtime.

What does this mean for your business? In simple terms, it means that under this proposal, you may need to begin paying overtime to exempt workers earning less than $970 a week. In more complex terms, it means that you may need to begin curtailing the work hours of exempt employees in order to keep their work hours below 40 hours a week. Some companies and businesses are already developing plans to limit after hours work activities, while some business experts predict that businesses may hire more employees in order to fill the extended hours that were worked by the previously exempt employees.

If you require further information or guidance on this new proposal, please contact us and schedule a meeting with one of our HR experts! We will be happy to help ensure that your employees are correctly classified and you have the proper programs and policies in place to manage your employee scheduling and workload.

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