Welcome to the newest post in our blog series, Compliance Corner. We frequently provide member-only regulatory toolkits on key regulatory truckstop and travel plaza issues on NATSO’s website. Perodically, we feature a snapshot of the full toolkit here on the blog.
In May 2016, the Department of Labor finalized new rules governing which employees are eligible for overtime pay. Under the new rules, any employee earning less than $47,476 per year ($913 per week) is entitled to overtime pay (at least 1.5 times their normal salary) for all hours worked per week in excess of 40. Nondiscretionary bonuses may count toward up to 10 percent of an employee’s salary if they are paid on a quarterly or more frequent basis.
The new salary threshold will go into effect Dec. 1, 2016.
Below is an overview of six options that employers may consider in responding to the new overtime rules:
- Increase the employees’ salaries by the amount necessary to reach the new salary threshold ($47,476). This option makes the most sense with respect to employees earning a salary near but less than the new threshold.
- Limit employees to 40 hours per week and assign additional work to other employees (including potentially hiring more employees). This option makes the most sense for employers with salaried employees who generally have little need to work more than 40 hours per week. On those rare occasions where employees are required to work more than 40 hours in a given week, the costs associated with paying overtime will be relatively small.
- Simply pay time-and-a-half overtime pay for all hours above 40 per week (<strong ">i.e., the employee will receive 1.5 times his salary divided by 40 for every hour of overtime worked). This option makes the most sense for employers that do not want to substantially restructure their employees’ hours and salaries and the associated administrative costs that go along with that.
- Increase the number of hours to which a salary is tied. An employer may designate in writing that an employee’s salary is intended to compensate for a number of hours worked greater than 40. In these circumstances, employees are entitled to just 0.5 times overtime pay (rather than 1.5) for hours worked over 40 up to that number. Employees would then be entitled to traditional time-and-a-half overtime pay for hours worked over that number. This option makes the most sense for employers that have employees with a steady schedule that tends to be slightly greater than 40 hours per week.
- Decrease Employees’ Pay. Employers are not prohibited from lowering the pay rate of employees who will be newly eligible for overtime, such that their new pay rate combined with their new overtime payments will equal their pay rate prior to the new overtime rules taking effect. This option makes the most sense for employers that would like to adjust to the new overtime requirements without being subjected to any increased labor costs.
- Fluctuating Workweek Method.Under this method, an employee’s rate of pay will vary based on the number of hours worked. This option should only be undertaken by employers willing to invest in legal counsel to ensure that the fluctuating workweek method is implemented appropriately.
// NATSO Members: Get the Full Regulatory Toolkit. NATSO has prepared a document outlining these issues and more. The full document is available to NATSO members here.
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