New Overtime Rules Go into Effect on December 1, 2016

The FLSA ensures minimum wage and overtime pay protections for most employees covered by the Act. Some workers, including bona fide executive, administrative, and professional employees, are exempt from those protections. There are tests to determine which employees are EAP employees. But even if an employee meets the tests to be exempt they also must meet a minimum salary threshold. Currently, that amount is $455 per week ($23,660 annually) .

When this Final Rule takes effect on December 1, 2016, the “standard” salary level will increase to $913 per week (equivalent to $47,476 annually for a full-year worker).

There are also rules for Highly Compensated Employees (HCEs). The requirements to be considered exempt from overtime rules are not as stringent for HCEs.The total annual compensation requirement for highly compensated employees will increase to $134,004 per year, up from $100,000 per year on December 1,2016.

The Department is changing the regulations to allow nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g. a bonus based on the specified percentage of the profits generated by a business in the prior quarter).

Employers should plan to have the proper record keeping of time for employees who fall under the new rule.

As with most rules, this can be more complicated than it looks so here are two links with more information.

Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees

Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA)

 

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