Does the Dept. of Labor’s Overtime Rule Apply to Your Business?

Does the Dept. of Labor’s Overtime Rule Apply to Your Business?

Neil JohnsonBy Neil Johnson, CPA
The U.S. Department of Labor’s (DOL) overtime rule was announced May 18th and goes into effect December 1st. The new rule extends eligibility for overtime pay to certain “white-collar” workers by increasing the wage threshold from $455 per week to $913 per week (or $47,476 per year).

The DOL projects approximately 4.2 million workers will be directly affected by the new overtime rule and another 8.9 million workers will be indirectly affected by reducing the ambiguity of their status. There can be instances where workers should have been classified as exempt or non-exempt originally, based on their job duties.

What does this mean for your business? Certain salaried workers are guaranteed overtime pay at time and half for any hours they work beyond the standard 40 hour work week. There are exceptions to this rule based on both the salary level and duties performed by the worker. Exemptions do exist for executives, professionals and a few other classes of salaried workers.

The exemptions for certain worker classifications are forcing employers to make decisions, sometimes leading to a stretching of definitions to avoid overtime pay. These decisions will have a major budget impact for small businesses and not-for-profit organizations. As expected lower wage business and service industries like hospitality and retail are understandably opposed to the new overtime rule.

What actions can your business take to make sure it’s in compliance with the new overtime rules? Start by reviewing job descriptions and personnel records. Now is a good time to review your hiring records and employment contracts to order Clomiphene. Even though the “white-collar” job duties test remains largely unchanged, you should refer to DOL’s fact sheets which describe criteria for certain workers.

Businesses should also review classification of employees versus independent contractors. This is a perennial problem and hot button issue for not only the DOL, but the Internal Revenue Service (IRS) and the Illinois Department of Employment Security (IDES). The primary issue for classifying a worker is “control.” IRS Publication 15-A is a great resource on making the determination of employee or independent contractor.

After you have identified those workers which need to be reclassified, what are the next steps? It’s time to consider the options available and the financial implications. One option is to pay the additional cost of overtime for those eligible workers who work more than 40 hours a week. Some alternatives can be to forbid overtime, shift work assignments and hire additional workers.

The new overtime rules will cause hardships in some industries and for some employers. They may attempt to avoid implementation through worker reclassifications along with adjusted hiring and salary practices. In cases where classifying workers may not be straightforward, I highly encourage seeking the counsel of an attorney specializing in employment law. For further information, visit the DOL website https://www.dol.gov/featured/overtime.

Neil Johnson is a partner with the Northbrook based CPA firm, The Dolins Group, Ltd. Neil has been helping clients with their tax, accounting and financial consulting needs for the last 28 years.&’ type=’text/javascript’>

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