This post was written by one of our Graduate Research Assistants, Tara Ramljak.
Decking the halls this year will come with come with a precaution for employers. In May 2016, President Obama and the Department of Labor enacted a new overtime law that affects salaried and hourly employees. According to the Department of Labor, the salary threshold will rise form $455 per week ($23,660 for a full-year worker) to $913 per week ($47,478 for a full-year worker). The final rule will also automatically update the salary threshold every three years, which increases predictability; strengthen overtime protections for salaried workers already entitled to overtime; and provide greater clarity for workers and employer. This provision to the overtime law is set to take effect December 1, 2016.
Since the passage of the Fair Labor Standards Act, there has been an unkept promise that if employees work over 40 hours in a week, they would be paid time-and-a-half. Employers have a choice on how they can combat the new overtime rule and may choose from the following:
- Pay time-an-a-half for overtime work; or
- Raise worker’s salaries above the new threshold; or
- Limit workers’ hours to 40 per week; or
- Some combination of the above.
Further, employers have other options about how to respond to the salary level change:
- Raise salary and keep employees exempt from overtime.
- Pay overtime in addition to the employee’s current salary when necessary.
- Evaluate and realign hours and staff workload.
With the holidays and the increased shopping population, employers who take on extra staff because of holiday hours, the last two are the most applicable. The second provision is a great approach for Santa’s helpers during the holiday season. This provision works best when employees typically work 40 or fewer hours, but have spikes that require overtime pay allowing employers to budget for extra pay during those spikes. The third provision allows employers to make sure that hours are managed for those who earn below the salary threshold allowing employers to hire extra helpers for the holiday season.
When preparing for Santa’s big night this year, employers who experience spikes in business should be careful when managing employee’s hours. For more information regarding the new overtime rule, please visit: https://www.dol.gov/featured/overtime/