With the publication of the Department of Labor’s (DOL) Final Rule updating the overtime regulations, the DOL says will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. This means that California employers will need to make changes.

Understanding Overtime Labor Law Changes Under the FLSA

The stipulations regarding overtime pay mandated in the Fair Labor Standards Act have been changed and the impact will be significant for states such as California. As a result of these changes, millions of workers will lose their current FLSA-exempt status on December 1, 2016.

The hardest hit industries are likely to be education, retail, health services, leisure, hospitality, and business and professional services. The Final Rule does not affect the outside sales or inside retail sales exemptions, which do not include a salary threshold, nor does it affect the current duties tests for the “white collar” exemptions. 

This chart provides a highlight of the ten major components of the changes brought about by the Final Rule.

The Challenge is for Businesses With Many Low-Threshold Exempt Workers

Employers will need to educate themselves or avail themselves of the professional assistance and resources that are currently available to them. 

Before the Final Rule goes into effect on December 1st, employers should assess which employees will be affected, and how the employer will want to respond. One approach would be to raise the salaries and compensation of these employees to meet the new salary/compensation thresholds.

This course of action may impose not only direct costs, but also indirect costs by creating pressure to raise salaries for other employees higher up on the organizational chart, or causing disgruntlement for those employees if the salary differential is reduced.

Another approach would be to re-classify exempt employees as non-exempt and pay them overtime in accordance with the FLSA. To control costs associated with this approach, employers may be tempted to limit hours of non-exempt employees to 40 per week, or even consider reducing hourly rates to offset their expected future overtime earnings.

Getting Expert Help to Stay Up to Date and In Compliance

An updated payroll compliance strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the laws, prioritize employee and manager salary changes, and maintain accurate record keeping. In this way, you will make compliance a sure thing.

Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional payroll management and workforce solutions provider such as Accuchex can offer much-needed help with Human Resources needs and questions.

Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.