Overtime Final Rule: What you need to know
May 24, 2016
The Fair Labor Standards Act (FLSA) received a major revamp from the Department of Labor May 18, 2016.  As a result of the Final Rule on changes that have been in the making since 2014, approximately 4.2 million employees that were previously ineligible for overtime pay will now be able to receive it under federal law.
 
A look back:  The FSLA required that most employees working in the US be paid at least the federal minimum hourly rate, and receive time and a half for any hours over 40 per week.  Salary employees that earned more than $23,660 annually ($455/week) and met the criteria as executive, administrative, professional, some computer industry employees, and outside sales employees were exempt from this requirement.
 
The rule revamp raises the salary threshold for exempt workers by more than 100%. To be exempt from the FLSA’s minimum wage and overtime protections, the employee must satisfy these white collar parameters: 
  • The employee is paid a predetermined and fixed salary, and one that cannot be adjusted to as a result of performance.
  • The employee be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full year).
  • Primarily perform executive, administrative, or professional duties as defined by the DOL.
In addition, the Final Rule also states that up to 10% of the standard salary level can now come from non-discretionary bonuses, incentive payments, and commissions, as long as they receive these payments on a quarterly basis, at minimum. 
 
The last time these overtime protection rules were updated was 2004.  The DOL plans on increasing the salary threshold every three years. Current projections show the salary threshold is expected to rise to more than $51,000 with its first update on January 1, 2020.
 
Employers will be tasked with assessing which of their employees will no longer be exempt from overtime under the Final Rule.   They must make these assessments and adjust accordingly to comply with this new regulation by December 1, 2016.   
 
This ruling promises to have a significant impact on our local businesses, and will affect each business differently.  Please don’t hesitate to contact us so we may help you navigate these changes and chart the clearest course for your business.
 
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