If your company doesn't deal with overtime compliance already, chances are it's about to become your problem. Come December 1, 2016, the US Department of Labor's new ruling goes into effect, raising the threshold for nonexempt employees to $47,476 annual (or $913 weekly). This long-overdue update more than doubles the former salary threshold (just $23,660 annually), thereby extending overtime pay protections to over 4 million additional workers in the first year of implementation alone.
(Disclosure: I currently run marketing at Replicon, an HR Software provider)
While this is great news for employees, the change could pose a risk to your business. The thing is, paying OT has historically been an issue for businesses of all kinds, even without the new legislation. Despite the fact that the former overtime rules remained the same for over a decade, quite a few companies never seemed to totally figure them out. Here are a few particularly egregious examples:
- In 2013, Taco Bell employees filed a lawsuit claiming that the company inaccurately categorized assistant general managers as supervisors to deny them overtime pay. While Taco Bell tried to claim that assistant managers, like supervisors, are also exempt from overtime pay, the lawsuit accurately alleges otherwise. This, in addition to the discovery that Taco Bell failed to keep accurate records of employee info, weekly earnings, and shift assignments resulted in a $2.5M settlement for the company.
- Also in 2013, Bank of America agreed to a $73M settlement for approximately 185,000 of its call center employees. The lawsuit claimed that, due to perpetually understaffed call centers, nonexempt employees were required to put in work off the clock.
- A class of about 400 exterminators filed a lawsuit against environmental services provider Ecolab in 2013 for making them work long hours and withholding overtime pay. This violation of both California wage and hour laws and the FLSA resulted in a $29M class action settlement. Having not properly learned their lesson, Ecolab also paid out a $7.5M settlement to California exterminators after being similarly accused of withholding overtime pay.
With 8,954 wage and hour lawsuits filed in 2015 alone, there are literally thousands of other examples like this. In fact, the number of these lawsuits has increased each year since 2000, resulting in a total increase of more than 450 percent and an aggregate cost of $3.6B (since 2007). This is an insane cost to businesses, affecting everyone from Merrill Lynch to Walmart, and it's only expected to increase with the pending changes in overtime legislation.
There's still time for you to get ahead of new overtime changes before their December 1st implementation. The US Department of Labor has this handy overview, as well as this Q&A to help you understand what exactly is changing and how it affects you. For more specific information on new employee classification, use these guidelines.