Ask Mary Jo Dolson, a member of the state and local tax team at Skoda Minotti Strategic Marketing, if she thinks her clients are ready for new overtime regulations, and she’ll be quick to say “no.” Since the U.S. Department of Labor (DOL) first made the announcement of changes in May, Dolson thinks that many of her clients were guilty of doing what she did and putting it on the back burner of their to-do list.
Those clients no longer have to worry about the threshold to pay overtime to salaried workers increasing from $23,660 to $47,476 —at least not for now. On Nov. 22, U.S. District Judge Amos L. Mazzant issued a memorandum opinion and order that put the Dec. 1 deadline for the new overtime rules on ice. The ruling came after 21 states and a number of business groups sued the DOL in the hopes of stopping the regulation change, which would expand overtime pay to millions of workers.
The court found that the department exceeded “its delegated authority” in making such a substantial increase. In a prepared statement, the DOL voiced its disagreement.
“The department’s Overtime Final Rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule,” the statement read. “We are currently considering all of our legal options.”
Though on hold for now, this issue is far from dead. To make sure you’re in the know should the overtime regulation changes come to pass, here’s what you need to know:
Check State Regulations
Raising the salary threshold from $23,660 to $47,476 was the most significant proposed adjustment to the federal regulation, as far as small business owners are concerned. But Charles Sujansky, HR consultant at KEYGroup, says that’s not the only critical aspect of the proposed reform: Business owners would also have to comply with their state’s regulations. There are states that have stricter regulations than the federal one and just because a shop has met all of the federal requirements does not mean that they are set.
Dolson says that a business in Ohio, where she lived and worked for years, would most likely be set with the federal standards, but shop owners that run their businesses out of New York and California should check their state standards, as those two states commonly have different regulations.
Bonus Pay
Again, if the new rules went into effect, depending on the type of bonus, that extra incentive pay could be worked into an employee’s salary and count toward the $47,476 benchmark. Federal regulations state that a bonus awarded based on factors like increased customer satisfaction or reduced cycle time could be worked into a salary, Dolson says. Nondiscretionary bonuses and incentive payments (which includes commission) could be used to satisfy up to 10 percent of the salary requirement. However, a holiday bonus check at the end of the year that is awarded to all employees for a job well done would not count, Dolson explains.
If a shop owner decided to use bonus pay as part of his or her pay plan, it would not mean that he or she would be without options if the bonus wasn’t attained.
Beyond Payroll
By now, you might have at least begun talking to a financial advisor or looking at the way payroll is structured. Beyond taking a look at job duties and salaries, shop owners also need to look at how the proposed rule would change things like benefits packages,
Sujansky advises.
Sujansky doesn’t foresee a huge impact, but he suggests shop owners do a mini audit now to see how current benefits packages might be implemented. For example, life insurance depends on salary, so if a shop owner changes an employee’s salary to comply with the new regulations, that may impact that employees’ life insurance. If a shop owner increases the payroll of all of their employees, they may not be able to afford their current benefit packages.
Communicate
It is the shop owner’s responsibility to communicate potential changes with his or her employees, Sujansky says. He suggests pulling the whole company together and giving a basic overview of the situation.
Cover Your Bases
The future of overtime regulations is uncertain, but business owners need to make sure they have a firm understanding of what each of their employees do and how much they currently make, Dolson says. For business owners that fell behind, she advises making a list of each employees’ duties and determining based off that whether or not the proposed rule change would apply. Certain staff could qualify for an exemption if they perform a majority of the administrative work for the company. Both Sujansky and Dolson highly recommend talking to a professional, such as a financial advisor or an attorney, to make sure what you are prepared for the change, should it occur.
For commonly asked questions and answers about the proposed overtime rule, head to the U.S. Department of Labor’s website.
