Saturday, November 5, 2016

Only Weeks to Go Before New Overtime Rules Take Effect- What Does it Mean to You?

The rules are changing, soon, and in a big way.  New Department of Labor overtime regulations take effect on December 1, 2016, which will significantly expand the number of employees who must be paid at an overtime rate for hours worked over 40 per week.  Will these changes affect you?

The answer is almost certainly yes if you are a business owner or if you are an employee making less than $913 per week (approximately $47,000 per year).  Under current overtime laws (Massachusetts and federal), an employee is exempt from overtime only if two things are true: First, he or she is paid on a salary basis and earns at least $455 per week, and second, his or her actual job duties fall into one of the exempt categories (a bona fide executive, administrative, or professional employee- more on these later).

Who falls within the exempt duties has been fertile ground for litigation for years, and the new regulations don't change that reality.  What is so significant about the regulations is that they raise the threshold earnings from $455 per week to $913 per week, almost doubling it.  In plain language, it means that no matter what an employee's duties are, or whether they are currently classified as exempt from overtime, if they make less than $913 per week (approximately $47,000 per year), they must be paid overtime under the federal laws (1.5 times their hourly rate for all hours worked over 40 in any given week).

It is the employer's obligation  to keep a record of hours worked, which very much favors an employee where there are not accurate records and there is a dispute about whether an employee actually worked overtime.

Finally, both employees and employers should be aware that a successful claim for unpaid overtime can result in the employer paying two or three times the amount of unpaid overtime, and the employee's legal fees (in addition to what the employer has to pay its own lawyer).

How might employers respond to this change and would these responses be legal?

Some business might  adjust the base compensation going forward to offset increased overtime expenses- so long as the employee is paid the Massachusetts minimum wage, and so long as the change is not retroactive, this is legally allowed, though as a business matter it could have extremely negative effects on morale and retention, and might cause real hardship for employees.

It is not legal in most circumstances for an employer to try to convert employees to independent contractor status to avoid overtime obligations.  There are very strict rules in Massachusetts about who may and may not be treated as an independent contractor, and the penalties for getting it wrong can be harsh.

An employer may put a policy in place requiring approval for overtime hours, and may withhold that approval. If your employer has such a policy and you are asked verbally to work overtime, you should make sure that is documented somewhere- a confirming email, or even a handwritten note can help clarify whether the overtime was authorized or not.

If you are unsure how to address the new law in your  business, or if you are an employee who may be affected by this change, you should consult with an experienced employment law attorney.

+slnlaw LLC