Rule on Overtime
Get ready, local businesses. The Department of Labor has revised the definition of exempt employees, which is likely to impact many businesses across industry sectors. Small businesses with a high number of hourly and seasonal employees, nonprofits, and retail, restaurant, and manufacturing industries will be most affected.
Here are a few of the key details on the new rule:
- The final rule radically 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. The deadline to comply is December 1, 2016.
- 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.
- Tthe 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.
This presentation from Tammy McCutchen of Littler Mendelson P.C., former wage and hour administrator in the Bush administration, provides guidance on how to comply with the new regulation.