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Understanding New Overtime Regulations

Employers have until December 1, 2016 to comply with new overtime eligibility regulations developed by the U.S. Department of Labor (DOL). The update, announced May 18th, is expected to extend overtime eligibility to 4 million workers. Detailed information, including fact sheets for non-profit organizations, higher education, and local governments can be found on the Department’s website, along with a schedule of free webinars for all employers.

A few of the key details on the new rules:

•  The final rule increases the salary threshold under which most employees will be automatically eligible for overtime pay.  The current salary level required for exemption is $455 a week ($23,660 for a full-year employee), which was last updated in 2004, and the new exemption threshold will be $913 a week, or $47,476 per year.

•  Employers can take up to a 10% credit towards the salary threshold from commissions or bonuses as long as they are paid at least quarterly.

•  In addition, the change in the salary threshold also includes an automatic adjustment every three years. The adjustment will be tied to the 40th percentile of full time salaried workers in the lowest wage region of the country (currently the Southeast).

•  The overtime rule leaves intact the current “duties test” that employees must meet to be exempt, in addition to being paid a salary above the $47,476 threshold.

Legislation to block the new regulations has been introduced in the House (H.R. 4773) and Senate (S. 2707). The Protecting Workplace Advancement and Opportunity Act would also require the DOL to perform a better analysis on the impact changes to the overtime threshold will have on small businesses, nonprofits, regional economies, and local governments, in any succeeding proposed rule.

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