The Department of Labor (DOL) recently announced its long-awaited final updated rule governing which white-collar workers are eligible for overtime pay under the Fair Labor Standards Act (FLSA).1 Overtime pay is 1.5 times the pay rate and must be paid for hours worked in excess of 40 hours per week for nonexempt employees. All employers must comply with the new requirements no later than December 1, 2016.
The final rule is intended to modernize and simplify overtime requirements and ensure the FLSA’s intended protections are fully implemented. To accomplish this, the DOL has:
The FLSA requirements are minimums. The FLSA does not preempt any state standards that are stricter.
Public sector employers have several options for complying with the final rule on overtime pay under the FLSA:
Conducting an impact analysis should be the immediate next step for employers that have not already done so. An impact analysis involves:
The impact analysis should be followed by development of an implementation strategy, which includes:
Segal Waters, the public sector human resources practice of Segal Consulting, works with employers to develop custom solutions to the full range of human capital needs. As a leader in helping employers to prepare for and implement the new FLSA overtime changes, our professionals can assist you with:
1 Salary compression is the situation that occurs when there is a similarity of salaries despite different qualifications and/or experience levels. Two common examples of salary compression include: (1) when the pay of one or more employees is very close to the pay of more experienced employees in the same job and (2) when employees in lower-level jobs are paid almost as much as their colleagues in higher-level jobs, including managerial positions.
2 Because the Affordable Care Act requires employers with more than 50 employees to measure whether a worker is full-time (more than 30 hours per week or 130 hours per month) the FLSA analysis should take into consideration the Affordable Care Act process the employer has developed.
3 The final rule was published in the May 23, 2016 Federal Register.
5 According to the DOL, paying overtime or comp time works well for employees who usually do not work overtime, but have occasional “spikes” or periods that require overtime hours. The new rules allow employers flexibility with respect to how to record these overtime hours. See the DOL’s publication, “Overtime Final Rule and State and Local Governments.”
Update is Segal Consulting’s electronic newsletter summarizing compliance news. Update is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.
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