Massachusetts businesses should take special care to comply with the Obama administration’s sweeping new overtime-pay regulations, lawyers say, because the penalties they face for failing to do so are more severe than they are in other states.
The U.S. Department of Labor unveiled regulations this week that raise the salary threshold for overtime-eligible employees from $23,660 to $47,476. That means that unless they are managers, many salaried employees making less than $47,476 a year must receive overtime pay if they work more than 40 hours in a week.
Employers on the losing side of a wage case also must pay the legal fees for the worker or workers who brought the lawsuit. McCarter & English LLP partner John McKelway expects wage-related lawsuits against employers to increase locally, not only because of the new federal rule, but because of the increased awareness that the change will bring regarding which employees are exempt from overtime, he said.
The impact won’t be limited to those that run afoul of the law and find themselves in court. Businesses will need to evaluate who they consider a manager and how they track time worked by employees, especially in an age when workers are constantly replying to emails on their smartphones. Employers may need to change their employment policies and invest in new technology to help them track on-the-clock work. “Once an employee is no longer exempt, then you have to tighten up all of the recordkeeping aspects to this, you have to worry about employees who are using their smartphone to communicate with their employer… there is an administrative burden that is not to be underestimated,” McKelway said.
Startups in the technology sector also present special issues, according to McKelway. If an employee sues a startup that does not have much revenue, for instance, he or she may pursue the founder or chief executive of the startup in court for damages.