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Overtime Rule Changes Effective December 1, 2016

Employers should take the December 1, 2016 Overtime Changes very seriously. Millions of employees will need to be reclassified as “non-exempt” and paid overtime whenever they work more than 40 hours in a workweek. Other employees must receive an increase in their salary to meet the new requirement.  Is your business ready?  The time to implement changes is now!

The Department of Labor (DOL) issued changes (effective December 1, 2016) that substantially increase the minimum salary requirements of the Fair Labor Standards Act (“FLSA”). The FLSA requires most employers to pay “nonexempt” employees at least the minimum wage for each hour worked as well as overtime pay for hours worked which exceed 40 hours in a workweek. Currently, the FLSA includes exemptions for certain administrative, professional, executive, highly compensated, outside sales, and computer professional employees. There is also an exemption for “highly compensated” employees who are paid a total annual compensation of at least $100,000.  The employees who are “exempt” are not required to be paid overtime even if they work more than 40 hours a week.

One of the biggest changes, effective December 1, 2016, is that the salary threshold to qualify for an executive, administrative, or professional employee exemption has increased. The current salary threshold requirement is $23,660 per year.  After December, executive, administrative, or professional employees must meet the increased salary threshold of $47,476 per year to be “exempt”.   In addition, employers must have a clear understanding of which employees qualify as “exempt” and which do not.

Going forward, to qualify as a highly compensated employee, the employee’s salary must exceed $134,004 and the employee must customarily and regularly perform at least one of the exempt duties of an executive, administrative, or professional employee. In addition, every three years beginning January 1, 2020, the salary thresholds will increase. All updated rates will be posted in the Federal Register and on the Wage and Hour Division’s website at least 150 days before the effective date.  Subject to some restrictions, employers may use nondiscretionary bonuses, incentive payments, and commissions, to satisfy up to 10 percent of the minimum salary requirement for the administrative, professional, and executive exemptions.

The goal of the changes are to create an environment where “working extra hours equals extra pay”. It is essential that employers understand the changes and implement necessary policies to comply with the overtime rules.  Employers may contact our office to speak with an attorney who can analyze business practices and offer legal advice to assist businesses with implementing necessary changes to stay in compliance with the Department of Labor’s Rules.

October 7, 2016

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