***Court Temporarily Blocks Overtime Rule***
On Tuesday, November 22, 2016, a federal court issued an injunction to temporarily block the U.S. Department of Labor from implementing and enforcing its Final Overtime Rule nationally, pending further order by the court.
As a result of this ruling, employers currently do not need to comply with the below changes by December 1st.
We currently have no way of knowing if or when the status of this will change. Check back here as we will update this with new information as it becomes available.
New Overtime Rules Effective December 1, 2016
Beginning December 1, 2016 new Overtime Rules will be going into effect. The US Department of Labor issued revised rules earlier this year. The new salary level is not a minimum wage requirement, and you are not required to pay an employee the salary specified in the regulations. You are only required to meet the minimum salary threshold if you are claiming an applicable white collar exemption (see below) from paying the employee overtime.
The new rules:
The new rules:
- Raises the annual salary threshold from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) for the executive, administrative, and professional white collar exemptions from the overtime provisions under the Fair Labor Standards Act (see below). If an employee makes less than this and falls under one of the exemptions, then you will be required to pay them overtime.
- Updates the new salary threshold every three years beginning January 1, 2020, based on wage growth. Based on projections of wage growth, the threshold is expected to rise to more than $51,000 with the first update on January 1, 2020.
- Raises the "highly compensated employee" (HCE) exemption annual salary threshold from $100,000 to $134,004; and provides for updates every three years.
- Under the white collar exemptions; workers earning more than the salary threshold are still subject to the duties test (see below) to determine eligibility for overtime.
- Allows bonuses and incentive payments to now count towards up to 10 percent of the new salary level, where such payments are paid at least quarterly.
Who falls under the executive, administrative, and professional white collar exemptions?
- Executive - The employee's "primary duty" must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise (and managing 2 fulltime employees as well).
- Administrative - The employee's "primary duty" must include the exercise of discretion and independent judgment with respect to matters of significance.
- Professional - The employee's "primary duty" must be to primarily perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
- In all 3 above situations, the Employee must be paid on a salary or fee basis.
If you haven't already done so, you should take time to identify the impacted salaried, exempt employees who are currently paid a salary of less than $913 per week. To remain exempt, after ensuring these impacted individuals meet the appropriate duties test (see above) for the exemption, you will need to increase these employees' weekly salary to at least $913. Alternatively, such employees could be transitioned to non-exempt status and paid overtime. Also, consider the need to update your timekeeping policies and training for non-exempt employees who must track all hours worked, including overtime hours.
In response to the new rules you have 3 options or any combination of the below 3:
- Pay current salaries with time and a half for overtime
- Raise employees salaries above the threshold
- Limit employees hours to 40 per week
The exemptions provided above apply only to "white collar" employees who meet the salary and duties tests. The exemptions do not apply to manual laborers or other "blue collar" workers who perform work involving repetitive operations with their hands, physical skill and energy. Non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime pay, and are not exempt from overtime no matter how highly paid they might be.
The Department of Labor has a good website with many resources listed on the right side.