There are three main ways employers can adhere to the new regulations:
• Raise employees’ salaries above the new threshold,
• Limit employees’ hours to 40 per week, or
• Pay time-and-a-half for overtime work.
There are two other, more complicated options if employers want to continue to pay employees on a salary basis below the threshold amount: the Belo contract and the fluctuating workweek.
The Belo contract, named for a U.S. Supreme Court cased called Walling v. A.H. Belo Corp (316 U.S. 624 (1942)), applies if there is an agreement to pay a weekly salary for no more than 60 hours at a regular rate of pay that is not less than the minimum wage at 40 hours and one-and-a-half that rate for hours worked over 40. This can be beneficial if an employee’s job requires irregular work hours. Note that regulations require in 29 CFR 778.405 that “[t]he nature of the employee’s duties must be such that neither he nor his employer can either control or anticipate with any degree of certainty the number of hours he must work from week to week.” The same regulation also requires: “duties must necessitate significant variations in weekly hours of work both below and above the statutory weekly limit on nonovertime hours.”
The fluctuating workweek is outlined in federal regulations 29 CFR 778.114 and states that this method can only be used if the employee’s salary is sufficiently large to assure that no workweek will be worked in which the employee’s average hourly earnings from the salary fall below the threshold amount. This is best used with employees who do not customarily work a regular schedule of hours and are in amounts agreed on by the parties as adequate compensation for both long and short workweeks.
Both the Belo contract and the fluctuating workweek are complex options, and we recommend seeking advice of legal counsel before proceeding with either. Find a list of SPACC member attorneys here!
Department of Labor Overtime Regulations Overview
DOL Blog: “Plenty of Options with the New Overtime Rule”
Minneapolis/St. Paul Business Journal: “The overtime regulations just changed – here’s what you need to know”