The Department of Labor’s (DOL) final overtime rule will go into effect on December 1, 2016. The DOL’s Wage and Hour Division (WHD) states that the rule “updates the salary level required for the executive, administrative, and professional (EAP) exemption to ensure that the Fair Labor Standards Act’s (FLSA) intended overtime protections are fully implemented, and to simplify the identification of overtime-exempt employees.”
It’s estimated that 4.2 million workers will gain the right to overtime pay. The rule does not make any changes to the duties test for EAPs.
The final rule will increase the salary threshold from $23,660 to $47,476 annually (or from $455 to $913 a week). Employees who are paid below this threshold will be entitled to overtime pay, while employees paid at or above the new threshold may be exempt if they perform certain duties. The final rule will also increase the minimum annual salary for exempt highly compensated employees from $100,000 to $134,004.
Additionally, starting in 2020, the rule will automatically update these thresholds every three years to ensure that they provide useful and effective tests for exemption.
Employers who fail to comply with the overtime rule will open themselves up to potential litigation by the DOL, as well as private litigation, including class action litigation, according to Employee Benefit Adviser.
It’s important for your business to review its wage practices now to ensure compliance come December. In response to the new overtime rule, employers can do one or a combination of the following options:
- Pay time-and-a-half for overtime work
- Raise workers’ salaries above the new threshold
- Limit workers’ hours to 40 per week
For more information on the overtime rule and how it will impact your business, contact McGrath Insurance Group at 508-347-6850 or firstname.lastname@example.org.
*This article is written for informational purposes only and should not be construed as providing legal advice.