Each year the Texas Workforce Commission and the Wage and Hour Division of the U.S. Department of Labor investigate scores of Texas businesses for violating minimum wage and overtime laws. With the new federal overtime exemptions imminently taking effect, employers should review their payroll policies to ensure compliance. Beginning December 1, salaried employees who make less than $47,476 per year or $913 per week will be entitled to overtime pay for working more than 40 hours in a work week. Texas recognizes the federal minimum wage which is currently $7.25 an hour.
Plan now to be in compliance with the overtime rule on December 1. Salary alone is not the only factor for determining whether a salaried employee is entitled to overtime or is exempt:
- Salaried employees are paid a salary not an hourly wage;
- Full-time exempt employees’ salaries must be at least $47,476 annually; and
- Exempt employees must have executive, administrative, or professional duties, e.g., management, exercise of discretion and independent judgment, or work that requires advanced knowledge.
Nonexempt employees are entitled to overtime pay at time and a half for each hour worked beyond a 40 hour work week. The Department of Labor enumerated four options for employers to comply with the new rule:
- Raise salaries to maintain the exemption;
- Keep current salaries and pay overtime;
- Adjust workloads and schedules so that employees work no more than 40 hours per week; or
- Adjust wages by converting salaried employees to hourly.
Raising salaries and paying overtime is not financially feasible for many small businesses. Converting salaried workers to hourly pay could tank employee morale. Another way to comply with the new rule without undertaking additional financial burdens is to adopt a workplace policy forbidding non-exempt employees from working overtime without prior written approval from a supervisor. Enforce the policy consistently. This allows the business to predict and control labor costs while encouraging healthy work-life balance for employees.
The last minute has arrived. If you haven’t already adopted procedures to comply, consult a lawyer to help your business transition to the new rule. The Department of Labor has published this fact sheet for employers: https://www.dol.gov/whd/overtime/final2016/general-guidance.pdf