U.S. Department of Labor Finalizes New Overtime Rules
On Wednesday, May 18, 2016, the United States Department of Labor released the new overtime rules under the Fair Labor Standards Act. The Department of Labor estimates that 4.2 million employees will be affected.
In order for an employee to qualify as an exempt executive, administrative, or professional employee under Section 13(a)(1) of the Fair Labor Standards Act, the employee must be “compensated on a salary basis at a rate per week of not less than the 40th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census Region.” Effective December 1, 2016, the new threshold for salaried employees to be exempt from overtime is $913 per week ($1,826 if paid biweekly, $1,978 if paid semimonthly, or $3,956 if paid monthly).
In addition, Highly Compensated Employees (HCE) have also had an increase in their threshold minimum from$100,000 to $134,000.
Beginning on January 1, 2020 and every three years thereafter, the Secretary of Labor will be required to update the threshold to an amount equal to the 40th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census Region in the second quarter of the preceding year as published by the Bureau of Labor Statistics.
Employers will have to choose from three options when dealing with salaries for Administrative, Professional and Executive employees:
- Raise the employee’s salary to meet the new threshold;
- Pay overtime;
- Limit employees to forty (40) hours a week; or
- Some combination on the above.
While the new rules do not take effect until December 1, 2016, it is important for employers to immediately look at their compensation packages and prepare for the changes. If you would like discuss how these new rules will affect your business, contact Chris Hesse at 314-862-0420 or chrishesse@hessemartone.com.
A copy of the new Department of Labor regulations can be viewed here.