Understanding the New Overtime Rules

Whether you are an employer or an employee, this is a MUST read!

Did you know, according to the Center for Progress findings last year 60 percent of salaried workers were guaranteed overtime pay in 1975. Today, only 8 percent are.

The FLSA establishes overtime requirements for employees in the private sector working for a covered employer.  The law generally requires that employees receive overtime pay for hours worked over forty in a workweek.  The FLSA exempts certain employees from overtime protections including, for example, employees who fit within the exemption categories for executive, administrative, professional, and highly compensated employees.  To qualify as an exempt, employees must meet a minimum salary threshold and certain duties requirements for the particular exemption.

One of the most significant employment developments in recent years is the new overtime regulations under the federal Fair Labor Standards Act (“FLSA”).

What do the new rules mean for you?

According to Jessica Pecoraro and Mari Kaluza, “In May 2016, the DOL issued its final rule significantly increasing the minimum salary employees must receive for employers to classify employees as exempt under the FLSA.  The minimum salary for the executive, administrative, and professional exemptions increased from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).  In addition, the total annual compensation requirement for the highly compensated employee increased from $100,000 to $134,004 per year.”

They go on to say, “The final rule became effective on December 1, 2016.  As part of this rule, employers needed to audit their current workforce and determine whether employees who are currently classified as exempt are paid less than $913 per week ($47,476 per year).  Assuming these employees meet the corresponding duties requirements, their salary must be increased to the minimum salary threshold of $913 per week to maintain the exemption.”

This means that companies will either have to:

1) Increase employee salaries above the salary threshold, or

2) Pay employees less than the salary threshold, and pay overtime wages.

A Federal judge recently put a temporary injunction on the Department of Labor’s planned change to overtime rules.  With this preliminary injunction now in place, the Department of Labor can still appeal the ruling. What does all of this mean for businesses? For one, it means more uncertainty about what the future may hold.  Stay tuned for more updates!