4 Things you need to know about the New Federal Overtime Rules

Although I’ve been reading about this for over a year, I was still scratching my head about the New Federal Overtime Rules even a week or so ago!  Four important basics follow. 

The first thing you need to know is it takes effect December 1, 2016.

The second thing you want to know is whether your salaried exempt employees are still exempt from overtime, or if they will now be eligible for overtime.  To be paid as salaried exempt (no overtime), they MUST meet ALL of these rules:

  • As of December 1, 2016 the employee must make $47,476 or more per year.  ANYONE making less than that is automatically non-exempt (not exempt from overtime, i.e., they are eligible for overtime).   Prior to that, the threshold was $23,660.
  • The employee must be paid a set amount each week, not varying based on how many hours worked.
  • Their duties must include “managerial” decisions, such as supervising others, with the authority to hire and fire or greatly impact personnel decisions. For the complete list, go to https://www.dol.gov/whd/overtime/final2016/general-guidance.pdf

Best Practice: Perform an audit of all your existing employees and if an employee doesn’t meet any one of these, that employee is non-exempt, meaning they are eligible for overtime pay.

The third thing you’ll want to consider are the several options to “stay legal.” A few are listed here:

  • Raise pay: You can increase the person’s pay to minimum $47,500, and if you meet the other 2 requirements you may still pay the employee as salaried-exempt (from overtime).
  • Reclassify the position: If it isn’t practical to raise the pay for that position, change the employee to hourly.  Compensation is then based on hours worked, with time and a half paid for any hours over 40.  In this case, pay will have to be converted to an hourly rate and hours will have to be recorded.  This will also require a change in the job description.
  • Start looking at hours worked now:  If the person/role regularly calls for more than 40 hours, you will need to either plan to pay overtime, or consider other options to achieve the duties of that position.  You may consider these options: 
  • Redistribute duties: If an employee habitually works more than 40 hours per week, and you want to keep their pay at its current level, then redistribute duties that someone else can do so that you can keep both roles within the 40 hour work week.  This would require a change in job description.
  • Require that overtime be authorized:  Require these “new” hourly employees to get approval prior to working more than 40 hours in a week. Even if the overtime wasn’t authorized, always pay for all hours worked, but cite any employee who works unauthorized overtime, and if it continues, take appropriate action. 

The fourth thing you’ll want to make sure you incorporate are Timekeeping Rules.  Hours worked by these formerly exempt employees must be reported accurately.  If employees are habitually poor at recording time manually, strongly consider an automatic time recording system.

When we worked on our policy at Apartment Dynamics, here are a few things we considered:

  • We wanted to obey the law (we’re hearing that’s not a given, but it always is with us).
  • We didn’t want to take anything away from our employees, in particular, we didn’t want anyone to lose any money. 
  • We held individual phone calls with each affected employee, explaining the change in the rules, discussing the options we were considering, and asking their thoughts and opinions.
  • We wanted to mitigate impact to our investors/owners.
  • We wanted any change (such as timekeeping) to be simple to administer for site staff and HR / Payroll. 
  • We needed to look at each affected job situation before making a final decision on how best to achieve all these things. 

If you’re still scratching your head about the New Federal Overtime Rules, there are excellent resources on the NAAHQ.org and NMHC.org websites.  They jointly produced a webinar that can be accessed by members at the following link:  http://www.naahq.org/learn/government-affairs/labor-employment/overtime-guidance-webinar.

Mary Gwyn, CPM
Making the World a Better Place One Lease at a Time!