Creative Solutions for Employers to Navigate Overtime Pay Changes

It’s a foregone conclusion that the U.S. Department of Labor (DOL) will issue new overtime rules that will more than double the threshold for exempt status under the Fair Labor Standards Act (FLSA), which entitles non-exempt workers to overtime pay when working beyond the standard 40-hour workweek. The new rules will undoubtedly cause many employees who have traditionally been paid a regular salary to transition to hourly employees with overtime (much to their chagrin). However, careful planning may avoid this pitfall. Employers who want to continue to pay employees falling below the new DOL threshold on a salary basis should be aware of two lesser-known methods of maintaining a compensation plan akin to a traditional salary for non-exempt employees – the fluctuating workweek method and the Belo contract. “The salary threshold for overtime exemption has remained unchanged for so long that employers traditionally have not had to consider other sanctioned options,” says David James, employment attorney at Nilan Johnson Lewis who helps employers navigate overtime pay. “The DOL’s anticipated changes are casting new light on these compensation methods that have been available in the background for decades but rarely used.” NJL wage-and-hour attorney Jeremy Robb says employers should seek counsel before carrying out either of these two methods. “They are not easy to implement, and there is potential for mistakes, such as underpaying employees, which can result in class or collective actions.” Both attorneys note that if done correctly, these methods can provide employers with a consistent weekly salary for employees, which both employers and employees generally prefer. To speak with the attorneys about these and other wage-and-hour law issues, contact David James at 612.305.7573 or djames@nilanjohnson.com, and Jeremy Robb at 612.305.7716 or jrobb@nilanjohnson.com. For media inquiries, contact Aaron Berstler at 651.789.1264 or aaron@kohnstamm.com.

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