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How the New DOL Overtime Rules Impact Retail and Hospitality Employers

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On April 23, 2024, the Department of Labor (DOL) announced a final rule regarding exemptions for executive, administrative, professional, outside sales, and computer employees under the Fair Labor Standards Act (FLSA).

This rule will bring significant changes to the retail and hospitality industries, particularly affecting overtime eligibility.

Here’s what employers in these sectors need to know about the updated regulations and how TimeForge can help maintain compliance while reducing overall labor costs:

Overview of the final rule affecting overtime

The DOL aims to ensure that employees are fairly compensated for overtime work. The new rule, effective July 1, 2024, revises regulations related to section 13(a)(1) of the FLSA by raising the standard salary levels and thresholds for exempt status.

These updates impact employees categorized as executive, administrative, and professional (EAP), as well as highly compensated employees (HCEs).

Key changes employers need to know

Salary threshold increases:

  • Standard Salary Level: The threshold will increase from $684 to $844 per week on July 1, 2024, and to $1,128 per week on January 1, 2025.
  • Highly Compensated Employees (HCEs): The annual compensation threshold will increase from $107,432 to $132,964 on July 1, 2024, and to $151,164 on January 1, 2025.
  • After July 1, 2027, these thresholds will be updated every three years to reflect current earnings data.

New automatic adjustments:

  • The new rule includes a mechanism for periodic updates to salary levels, ensuring these remain aligned with economic realities.

Duties tests remain unchanged:

  • The final rule continues to apply the existing duties tests that define EAP and HCE exemptions.

Impact on retail and hospitality employers

  • Increased payroll costs: Employers may face higher payroll costs if non-exempt employees must now be compensated for overtime. These are likely to be corporate office staff, salaried managers, and some higher-paid shift leads.
  • Reclassification of employees: Workers previously exempt might need to be reclassified as non-exempt, affecting labor strategies.
  • Administrative adjustments: Employers will need to monitor these salary thresholds and adapt their payroll systems regularly.

Actions employers can take

For employers with eligible workers earning below the salary threshold, one of the following actions must be taken before July 1:

  1. Raise salaries: Increase the wages of affected employees to meet the new threshold, maintaining their exempt status.
  2. Reclassify to non-exempt: Convert employees to non-exempt status, making them eligible for overtime pay.

If opting to reclassify to non-exempt status, employers can choose to pay either a salary plus overtime or an hourly wage plus overtime.

In both cases, it’s essential to track all work hours and ensure overtime is paid when employees work over 40 hours per week, on top of their regular salary or hourly wage.

How TimeForge helps with overtime compliance

TimeForge’s workforce management platform offers features tailored to address the challenges brought by the new rule:

  1. Accurate time tracking: Seamlessly track hours worked to ensure proper overtime compensation and classification among salaried and non-salaried staff.
  2. Automated scheduling: Easily identify and schedule shifts that prevent excessive overtime hours for non-exempt employees. Enforce schedules to control hours worked.
  3. Payroll integration: Integrate with your payroll system to streamline compliance and prevent overpayments.
  4. Important alerts: Receive alerts when employees are at risk of crossing into overtime or require reclassification due to salary changes.

And of course, TimeForge has on-demand reports that can help you easily identify employees who need to be reclassified or are working more than 40 hours a week.

Conclusion

Navigating these new DOL rules is critical for retail and hospitality employers. By understanding the upcoming changes and leveraging workforce management solutions like TimeForge, businesses can stay compliant while ensuring their workforce is treated fairly. Start preparing now to avoid disruptions when these rules come into effect.

Explore how TimeForge can simplify your compliance efforts.

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