Client Alert - Employment Law Update
US Department of Labor Issues Final OT Rule
On May 18, 2016, the U.S. Department of Labor issued its much-anticipated new Rule, expanding overtime regulations. The new Rule is effective December 1, 2016, and will significantly expand the number of employees, who must be paid overtime.
As explained in an earlier Client Alert, the Department of Labor has been in the process of updating its regulations that pertain to the Fair Labor Standard Act's "white collar" exemptions. These permit certain categories of employees to be exempt from overtime rules, and require that employees (1) be paid on a salary basis, (2) satisfy the "duties test" of an applicable exemption, and (3) meet the minimum salary threshold.
Under the new Rule, the minimum salary has been raised from $23,600 to $47,476. Therefore, employees earning less than $47,476 no longer qualify for the exemption, and must be paid overtime. In addition, the "highly-compensated employee" exemption has been raised from $100,000 to $134,000. The Department provided some relief to employers by allowing them to count incentive-based compensation, including commissions and non-discretionary bonuses, to satisfy up to 10 percent of the new salary threshold. Finally, the new Rule will automatically adjust the minimum salary threshold higher every three years.
What to Do
Employers should begin by evaluating their salaried employees, who receive less than $47,476 in annual salary, to determine the best course. This could include raising their salaries to meet the new standards, hiring new staff and limiting overtime, giving workers more responsibilities, or reclassifying them from exempt to non-exempt. In addition, this is a good opportunity to evaluate their classification of all salaried employees to ensure that they meet their respective "duties" test," and to review payroll and time-keeping practices to ensure they are properly recording hours worked by employees
If you have any questions about how this legislative enactment will affect your business, or about your employment policies and practices in general, please contact Mr. Gonzalez at 312-558-9779 or at egonzalez@elvisgonzalezltd.com.
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