CLIENT ALERT: Final Overtime Rule Will Affect 4.2 Million Workers
The United States Department of Labor (DOL) issued the final update to its proposed “Overtime Rule” this week, a revision to the Fair Labor Standards Act.
The salary threshold for white collar exemptions will be increased to $47,476 from the current threshold of $23,660, effective December 1, 2016, affecting 4.2 million U.S. workers. Vice-President Joe Biden is in Columbus, Ohio today to share this announcement.
Key Overtime Rule Changes:
- Full-time salaried workers earning less than $47,476 annually will be eligible for overtime pay (previous threshold was $23,660).
- The Highly Compensated Employee (HCE) annual compensation threshold will be increased to $134,004 from $100,000 for full-time salaried workers.
- Employers have six months to prepare for the change, which will be effective December 1, 2016.
- Bonuses, commissions and incentive pay for non-HCE employees may be counted toward 10% of the threshold if paid at least quarterly.
- The overtime salary threshold will be updated every three years based on wage growth, to be posted by DOL 150 days before effective date.
- Duties test for white collar salaried workers will remain unchanged.
The DOL is proposing the following ways for businesses to comply with these changes:
- Pay salaried employees earning less than $47,476 annually time-and-a-half for overtime work.
- Raise workers’ salaries above the new $47,476 annual threshold.
- Limit hours worked for salaried employees earning less than the threshold to 40 hours per week.
Webinars on the new overtime rule will be conducted by the DOL in May and June. See the scheduled webinars and register here.
According to the DOL, this exemption threshold has not been updated since 2004 and was due to be revised as “President Obama directed the Secretary of Labor to update the FLSA’s overtime pay protections and to simplify the overtime rules for employers and workers alike.”
For more details on this update rule, check out the DOL’s Overview and Summary and Small Business Guide.
We hope this information has been helpful to you. If you have questions about how the proposed overtime rule affects your business, please contact your Whalen & Company representative.
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