How the New Exempt Salary Rule Affects the Construction Industry

The Department of Labor (DOL) wants to raise the exempt salary threshold for some workers. This means that more employees could qualify for overtime pay. The DOL has issued a Notice of Proposed Rulemaking (NPRM) to increase the exempt salary threshold for the Executive, Administrative, and Professional (EAP) overtime exemptions. These are also known as the “white collar” exemptions.

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What is the Exempt Salary Threshold?

The exempt salary threshold is the minimum amount of money that an employee must earn to be exempt from overtime pay. Overtime pay is usually 1.5 times the regular rate of pay for any hours worked over 40 in a workweek. The current exempt salary threshold is $684 per week or $35,568 per year. The DOL’s proposal would increase it to $1,059 per week or $55,068 per year. This change would affect about 1.5 million workers nationwide, according to the DOL.

When Will the New Exempt Salary Rule Take Effect?

The new exempt salary rule is not final yet. The DOL has to go through a public comment period, which ends on February 16, 2024. Then, the DOL has to review the comments, make any changes, and publish the final rule. The DOL estimates that the final rule will take effect in late 2024 or early 2025. The DOL also plans to update the exempt salary threshold every three years, based on inflation and wage growth.

How Does the Exempt Salary Rule Affect the Construction Industry?

The construction industry employs many workers who may fall under the EAP exemptions. These include managers, supervisors, engineers, architects, accountants, and other professionals. To be exempt from overtime pay, these workers have to meet three criteria:

• They have to be paid on a salary basis, meaning they receive a fixed amount of pay regardless of the hours or quality of work.
• They have to earn at least the exempt salary threshold, which is currently $684 per week or $35,568 per year and may increase to $1,059 per week or $55,068 per year.
• They have to perform certain duties that are typical of their exemption category, such as managing, supervising, or exercising discretion and independent judgment.

If any of these criteria are not met, the worker is entitled to overtime pay. For example, if a manager earns $50,000 per year, but does not have the authority to hire or fire employees, he or she is not exempt from overtime pay. Similarly, if an engineer earns $60,000 per year, but works more than 40 hours per week regularly, he or she is not exempt from overtime pay.

What Should Employers Do to Prepare for the New Rule?

Employers in the construction industry should review their exempt employees’ salaries and duties to make sure they comply with the new exempt salary rule. If any employees are below the new exempt salary threshold, employers have two options:

• Increase their salaries to meet or exceed the new threshold, and keep them exempt from overtime pay.
• Reclassify them as non-exempt, and pay them overtime for any hours worked over 40 in a workweek.

Employers should also keep accurate records of their employees’ hours, wages, and job duties, and update their policies and procedures accordingly. Employers should also communicate with their employees about any changes in their pay or status, and train them on how to track and report their hours.

How Can eBacon Help You Stay Compliant?

eBacon is a cloud-based software that helps you manage your payroll, compliance, and reporting for the construction industry. eBacon can help you:

• Calculate and pay overtime correctly, according to federal, state, and local laws.
• Track and report your employees’ hours, wages, and job duties, using GPS, biometric, or web-based time clocks.
• Generate and submit certified payroll reports, prevailing wage reports, and other compliance documents, with a few clicks.
• Stay updated on the latest labor laws and regulations, and get alerts on any changes that affect your business.

eBacon can help you save time, money, and hassle, and avoid costly penalties and lawsuits. Contact eBacon today to see how you can keep your company in compliance.

The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.