Podcast Key Highlights
What Is the Department of Labor’s New Proposed Rule Regarding Overtime Compensation?
- Right now, if you’re employing anyone who’s salaried and not supervising someone and that person is making more than $35,000 a year, you don’t have to pay that person overtime.
- The Department of Labor is looking to change that and raise that salary limit up to $55,000 a year.
- This means, anyone considered a non-exempt employee, that doesn’t supervise others and is on salary can be making $55,000 a year.
- If they’re making under that and they work over 40 hours in a week, you would need to pay them overtime at 1.5 times their hourly rate.
- It’s also important to make sure you’re meeting with a labor attorney or an HR expert to discuss this overtime ruling. You want to make sure your employees are classified the right way.
Transcript
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Gene (00:02):
Hey everybody, it’s Gene Marks and welcome to another episode of the Hartford’s Small Biz Ahead podcast. Thank you so much for joining me. This week, I’d like to talk to you about actually something that was recently in the news. The Department of Labor has come out with new proposed rules regarding overtime compensation, and I think it’s something we all need to know about here. So let me just give you some round numbers, right? Right now, if you’re employing anybody who’s generally salaried and not supervising anybody, so it’s not somebody that’s in an executive or a management role, for example. And that person is making more than $35,000 a year, approximately. It’s like 35,000 in change, but say more than $35,000 a year, you don’t have to pay that person overtime. That person can work 60 hours a week and you just still pay the salary.
Gene (00:53):
That person does not have to be paid overtime. Well, the Department of Labor is looking to change that, and they have recently issued proposed rules to raise that salary limit up to about $55,000 a year. Which means that if you are employing again, anyone, that’s considered to be non-exempt, in other words, somebody that is… doesn’t supervise anybody, they’re on a salary, there are other details about what their responsibilities are. But just in general, a salaried person that’s not supervising somebody, that person could be making… now, if this rule goes through up to $55,000 a year, and if they’re making under that, then any hours they work over 40 hours a week, you would owe them overtime pay at one and a half times their hourly rate. Now, there’s a lot of ins and outs to this proposed rule.
Gene (01:50):
There’s more definitions or expanded definitions on who’s eligible for this as well. There’s rules about if somebody works 35 hours one week, but then 45 hours another week, how does that all, step into overtime as well? I’m not gonna get into the weeds on all of that. I just want you to know this. You have gotta make sure that you are meeting with a labor attorney or somebody expert in HR to discuss this overtime ruling. Why? Because you need to make sure that your employees are classified the right way. You need to make sure that your employee titles match what their duties and the responsibilities are, and you need to make sure that the people that are considered to be non-exempt, in other words, they’re not exempt from this role. If they fall into the category where they’re owed overtime, you need to make sure that they are getting their overtime pay. Now, why do you want to do this? Because if you don’t, you could not only be subject to back pay, fines and penalties and also if this is going on with more than one employee in your business, those employees can collectively get…
Gene (02:58):
Together with a smart and hungry enough attorney, really create a lot of headaches for you as far as damages that are being concerned. So even before this rule becomes sees the light of day, and there’s… we don’t have a timeline yet when this’s gonna happen, but the clock is ticking. You need to make sure you get your ducks in order so that you’ve got your employees properly classified and the ones that are supposed to be getting overtime are getting overtime. Now, there are a couple things though to also keep in mind that it could figure into a delay of this rule. One is that right now the Department of Labor does not have a secretary of labor. They have an acting secretary of labor. The former Secretary of Labor, Marty Walsh resigned months ago. The acting secretary of labor is a woman named Julie Su.
Gene (03:44):
Acting secretary Su is just in that role right now. She wants to become the permanent secretary of labor, but the Senate has not confirmed her. So there is a question as to whether or not a rule like this can be implemented when there’s only an acting secretary of labor in charge and not an actual Senate confirmed leader of the Department of Labor. So that’s one issue. The second thing is, is that years ago back when president Obama was president, he tried to raise this limit up to this wage up to $47,000. This was a while ago. And he was stopped from doing it. One judge overturned it and said that exceeded their authority to do that. And then when it went to court and it was appealed, a lot of business groups, took up the side against it, and then the Obama administration was fighting it out in court, and then 2016 rolled around, the Obama administration went away, the Trump administration came in, and the Trump administration did not pursue it.
Gene (04:43):
So it just kind of fell by the wayside. So that’s likely to happen again. If this rule right now it’s been proposed. So there is very likely, if it hasn’t already happened to be lawsuits from business groups and business associations contesting this rule as well, which is gonna then delay things even more as it winds up in the courts. So all of that is going on, which might delay the implementation of this rule. But regardless, the rule right now stands that if you’ve got somebody that’s earning less than about 35,000 a year and they’re one of those non-exempt employees, you have to pay them overtime. I hope you’re doing this because if you’re not doing it, an employee gets wind of this. It’s not like the Department of Labor is gonna come and audit you. Employees are smart. They’ll notify their Department of Labor, and that’s gonna be a headache you don’t want to have. So make sure you’re in compliance with the overtime rules as it is now, and make sure that you are ready for a potential increase in the overtime maximum compensation. Some of my clients say they’ll cut back on on workers. Other clients say they’re gonna have stringent rules for their salaried workers as to when and when they can’t work…
Gene (05:56):
Overtime. That may be some stuff you want to consider doing, but the bottom line is it’s likely gonna have an effect on your business, and you want to take care to deal with that as sooner rather than later. Talk to a labor attorney or an HR specialist. My name is Gene Marks. You have been listening to the Hartford Small Biz Ahead podcast. This is where we offer some tips and advice to help you run your business. If you want additional tips and advice to help you run your business, visit us at SmallBizAhead.com or SBA.TheHartford.com. Again, my name is Gene Marks. Thanks for listening. I’ll be back next week with some more thoughts on helping you run your business. We will see you then. Take care.
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View Comments (6)
This proposed change to overtime rules is a big deal for businesses. Employers will need to take a close look at how they classify employees and structure their pay. If the rule goes into effect, it could mean higher labor costs, especially for companies with many salaried workers who are just above the current pay threshold. It’s also a good reminder that staying compliant with both federal and state labor laws, which can be tricky and differ by location, might require getting advice from legal or HR experts.
Thank you. Very useful.
You're welcome! Thanks for the comment!
My understanding is that in California the exempt employee also has to perform company level work, salary is not the only determining factor for exempt vs non-exempt status. Does federal law overrule state laws in this type of regulation?
Although federal laws generally override state laws, this is not a law but a regulation from the DOL. I believe that the federal DOL defers to states but you should check with a local labor attorney about this.
This is getting ridiculous. First $15.00/hr minimum wages which spiked the process of everything adding to the inflationary pressures and have spurred automation to replace the ability for younger folks to get into entry level positions. Then they want to add more costs by doing this. Regulation is important, but the negotiation of what people will work for should be a private matter between the employer and the employed based on local economic conditions and personal desires. The wages in New York and living costs are very different than they are in say Atlanta GA. This one size fits all by the administrative state is nothing more than taxation without representation.