The New Overtime Rule: What Employers Need to Do Now

Why the Overtime Rules Keep Changing

Few areas of employment law have been as volatile in recent years as overtime and exempt-status rules. Salary thresholds for the white-collar exemptions have been revised repeatedly, challenged in court, and reinstated, leaving employers unsure who actually qualifies as exempt. If your exempt classifications were set years ago and never revisited, they deserve a fresh look.

The stakes are high. Misclassifying an employee who should be non-exempt can trigger back wages, liquidated damages, and penalties, not to mention the administrative burden of correcting years of pay practices.

The Two Tests for Exempt Status

Meeting the salary threshold is only half the requirement. To be exempt from overtime, an employee must generally satisfy both a salary test and a duties test.

The Salary Test

The employee must be paid a fixed salary above the applicable threshold, regardless of hours worked. This threshold has moved repeatedly and varies by jurisdiction.

The Duties Test

The actual responsibilities of the employee must fit an exempt category. Titles mean nothing. What matters is what the person actually does day to day. An employee with a manager title who spends most of their time on routine administrative tasks may not qualify as exempt.

Common Misclassification Traps

• The working manager: A supervisor who spends most of their time doing the same hands-on work as their team may not meet the duties test.
• The inflated title: Assistant managers and coordinators are frequently misclassified based on title alone.
• The salary-only assumption: Paying someone a salary does not by itself make them exempt.
• The frozen classification: Classifications set years ago may not match current duties or the current threshold.

You cannot classify an employee as exempt because it is convenient. You can only classify them as exempt because the law says they are.

What to Do Now

• Audit every exempt position. Confirm both the salary and duties tests are met under current rules.
• Review actual job duties, not job descriptions. Ask managers what these employees really spend their time doing.
• Fix classifications promptly. Reclassifying to non-exempt and paying overtime is far cheaper than a back-wage claim.
• Update timekeeping. If employees become non-exempt, ensure you can track their hours accurately.
• Document your reasoning. Keep a record of how you evaluated each position.

Do Not Wait for the Next Headline

Overtime thresholds will keep changing. The employers who stay out of trouble are the ones who build a habit of reviewing classifications whenever the rules move and whenever a role changes. If you are unsure whether your exempt designations would hold up, a classification audit is a smart investment.