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New Overtime Requirements – Taking Effect December 1, 2016

I’m Charles Peckham with an update on the new FLSA updates signed into law by President Obama in May of 2016.

The new Overtime requirements are going into effect on December 1, 2016. There has been a great deal of concern about how these new rules will affect employees and employers. Let’s try to simplify that.

In short, it is going to make a much larger number of employees legally eligible for overtime – and will make more employers required to pay the overtime premium of time and a half the hourly rate for hours worked over 40 in a workweek.

The question is whether an employee is exempt from the overtime requirements of the Fair Labor Standards Act – the FLSA.

An employee can be exempt if they are classified as “Executive”, Administrative” or Professional”. While the guidelines for these exemptions are fact specific – one must meet a base salary requirement even to be considered as exempt.

The new law has three main changes.

First, right now the base salary level is $455 a week. As of December 1, a new formula will go into effect that as of now would make that base salary number $913 a week – or $47,476 annually for a full year worker.

Also this salary basis test does allow employers to use up to 10% of that base rate in NON-discretionary bonuses and incentive payments to meet that test.

Second, highly compensated employees (or HCE’s) are exempt now if making over $100,000 per year and meet other tests. Under the new law, that also is subject to a new formula which puts that number up to $134,004 a year.

Last, this new law also allows for a formula that is recalculated every three years to adjust those numbers – likely upward.

Employers and employees should make themselves aware of these new rules, as the failure to know and have pay calculated properly can be really costly for both.