Time to Plan for Overtime

Every June 25th marks the anniversary of the Fair Labor Standards Act of 1938. The FLSA introduced the forty-hour workweek, established a national minimum wage, and guaranteed overtime pay for eligible workers.

Seventy-eight years later, change is in the air. On December 1, new overtime regulations from the Department of Labor take effect, automatically extending overtime pay protections to over 4 million workers. It’s aligned with President Obama’s commitment to “ensure every worker is compensated fairly for his or her hard work.”

Here are the facts regarding the new regulation:

• The minimum salary threshold for being exempt from overtime is increasing from $23,660 per year to $47,476 per year (or $913 per week);

• The total annual compensation requirement for highly compensated employees is increasing to $134,004 annually; and

• The salary threshold will be updated once every three years.

• Employers will be permitted to use an employee’s non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level — subject to the following guidelines:

– Non-discretionary bonuses and incentive payments must be paid on a quarterly or more frequent basis and
– The employer may make a “catch-up” payment on the first payday following the close of the quarter, if the non-discretionary bonus/incentive payment falls short of the salary level;

The Department of Labor has released the following guidance materials:

Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees
Questions and Answers regarding the Overtime Final Rule
Guidance for Private Employers on Changes to the White Collar Exemptions in the Overtime Final Rule
Small Entity Compliance Guide to the FLSA’s White Collar Exemptions

We strongly recommend that employers start thinking about how the new rules will impact their current exempt workforce as soon as possible. If you have any questions or would like help getting compliant please contact Clear Employer Services at 215-701-9400.

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