The Department of Labor has just announced a final rule on overtime pay, which will now require 4.2 million more workers to be paid for overtime work. This final rule defines which white collar workers are protected by the Fair Labor Standards Act’s (FLSA) minimum wage and overtime laws. Employers must comply with these new regulations by December 1, 2016.
Here are some key provisions of the final rule:
- All workers paid less than $913 per week, or $47,476 annually, must be paid at the overtime rate for any time worked beyond 40 hours per week. Previously, this threshold was $23,660 per year.
- The threshold for highly compensated employees (HCE) has gone up, from $100,000 to $134,004.
- Allows for up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis. These payments were already allowed to be included in compensation for the highly compensated employee exemption.
- Overtime pay rate is time and one-half the regular hourly rate.
- Automatic updates to these thresholds will be made every three years, beginning January 1, 2020.
These new regulations aim to strengthen the middle class, which is first done by securing better salaries and overtime protections. Companies must act now to begin to plan for the increase in wages. For example, if an employee is earning $46K, passes the “duties test” for exempt status, and he/she frequently works overtime, a company may want to consider increasing his/her salary by December 1, 2016 to a level above the threshold to maintain the exemption.
Employers generally have three choices for affected employees:
- Limit workers’ hours to 40 per week
- Pay time and one-half their regular hourly rate for all hours worked over that limit
- Increase exempt employees’ salaries above the $47,476 threshold
For more information, see the Department of Labor’s Overview and Summary of Final Rule. Please call us at 630-953-4900 if you have any questions on this topic.