Nonprofit 411: Strategies to Prepare for New Overtime Rules

New Overtime Eligibility Rules Effective December 1, 2016 – Prepare Now to Avoid Issues and Penalties

By Saleha Walsh, Insource Services

You have most likely gotten notice(s) of the changes in the overtime eligibility rules. These changes have employers of all sizes concerned about the financial impact this may have on their organizations. We recommend that you start planning now for these changes, which will be adopted as of December 1, 2016. WALSH33 (1)

Background

The new overtime eligibility rules, taking effect December 1, are expected to impact millions of salaried workers. The rules focus primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt from overtime. Currently employees earning $23,660 or less annually are automatically eligible for overtime pay; the new regulations will increase that threshold to $47,476 annually regardless of the employee’s job function. For a number of our clients and other organizations, this will mean that administrative staff who have been considered exempt based on their duties would now be nonexempt if they make under $47,476 annually.

Employers not subject to the Fair Standards Labor Act are not subject to these rules, but those exemptions are rare.  Some nonprofits may be exempt as an entity, but often they will have some employees eligible as individuals. Our recommendation is that all employers comply with the general rules rather than risking a bad call on an individual employee by trying to use a loophole exemption.

Consider This

If the new rules result in employees newly eligible for overtime, you may need to change your processes and systems so that you can comply with the new rules.

  • Review and update job descriptions – Do they accurately reflect tasks performed by employees and are you sure your employees paid above $47,476 meet the job duties requirements to be exempt from overtime eligibility?
  • Review compensation levels – Should salaries be revised; who needs to be classified as non-exempt?
  • Evaluate hours and staff workload – Should hours and workloads be realigned? Should you consider restructuring full time positions into multiple part time positions for example?
  • Review record-keeping processes – Do you have the systems needed to meet the timekeeping requirements?
  • Communicate with Employees – Newly eligible employees now need to keep track of their time. Time tracking procedures may need to be established and direction provided.


What Options Might Work for My Organization?

If you have employees that meet the duties text (duties are executive, administrative or professional), regularly work overtime and have salaries close to the new salary level, you might consider raising the employees’ salary and keeping the employee exempt from overtime.  This might be more economical than paying overtime.

In the case where employees only occasionally work more than 40 hours, you can make no compensation changes and choose to pay overtime in addition to the employee’s current salary, when necessary.

Should you have newly eligible employees that regularly work overtime, and the options of either raising their salaries or paying them overtime would not be financially feasible for your organization, consideration should be given to be realigning hours and workloads to minimize/eliminate overtime.

Mitigating Costs and Risks

 There will be costs with implementing these new rules, but non-compliance can be more costly.  Violations get picked up in wage audits and can also be brought up by savvy employees who look around and wonder why some of their colleagues are paid overtime and they are not.  Penalties for non-compliance include payment of back wages, payment of overtime owed, liquidated damages and attorney fees.  The costs can add up quickly!

Additional Information

 The US Department of Labor has put together several notices outlining how the new rules affect organizations.  You can access these on the DOL website.

We Can Help

Insource’s HR consultants are professional with industry-specific knowledge and experience who can help you review the classification of your current staff and plan for the revised rules.  If you have questions about implementing the new DOL rules, or for more information on this topic, contact Saleha Walsh at swalsh@insourceservices.com or 781-374-5103.