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Department of Labor Issues New Overtime Rule

*** KMK will be offering training sessions to assist our clients in developing effective strategies to implement the new overtime rules.  Please join us on either May 26 or June 1 for an hour-long seminar to review the new rules and discuss best practices. ***

As anticipated, the Department of Labor’s (DOL) final overtime rules were issued on May 18, 2016. The new salary test is $47,476 per year or $913 per week. Effective December 1, 2016, these new regulations will impact all companies with salaried employees earning less than $47,476 annually. 

Currently, workers earning more than $23,660 per year, or $455 per week, are ineligible for overtime if they perform certain executive, administrative or professional duties. While the DOL’s final rule does not make any changes to the current duties test for executive, administrative and professional employees, the compensation requirements applicable to the exemptions has more than doubled. Also notable, for the first time, bonuses, commissions and incentive payments may count for up to 10% of the new salary threshold.

The final rule further provides for an update to the salary threshold every three years. Each update will raise the salary threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region. The new salary level of $47,476 is anticipated to increase to over $51,000 with the first scheduled update on January 1, 2020.

Additionally, the rule updated the “highly-compensated” employee salary level to $134,004 per year. Currently, under a special rule, highly-compensated employees earning a total annual compensation of $100,000 or more may be deemed exempt from overtime. 

The DOL is currently advising that employers may comply with the new rule by: (1) paying time-and-a-half for overtime work; (2) raising workers’ salaries above the new threshold; (3) limiting workers’ hours to 40 per week; or (4) some combination of the above. 

This significant change to a previously static rule requires careful attention to current employee classification and overtime pay and may require changes in these areas for many employers. Please join us at one of the above-mentioned seminar offerings to further discuss the new rules and the best practices for compliance. Registration is required.

KMK Legal Alerts and Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.


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