On May 17, 2016, the United States Department of Labor published its final rules for updating federal overtime regulations. With these new rules, federal overtime law will automatically extend overtime pay protections to over 4 million workers within the first year of implementation.
Today, executive, administrative and professional employees (i.e., “white collar” employees) are exempt from federal minimum wage and overtime pay requirements if they are paid more than $23,600 per year. Those employees that are paid less than that amount are deemed “non-exempt” and, therefore, are eligible for overtime pay if they work more than 40 hours per week.
Effective December 1, 2016, the answer to the question “who is exempt?” changes. At that time, only employees that meet the following requirement can be deemed exempt from overtime pay after 40 hours: (1) is the employee paid a predetermined and fixed salary and that salary is not subject to reduction because of quality and quantity of work performed; (2) does the amount of salary paid to the employee meet the minimum specific amount of $47,476 per month ($913 a week); and (3) do the employee’s job duties primarily involve executive, administrative, or professional duties. If the employee meets all three prongs of this test, then he or she is deemed to be exempt for overtime pay. If they do not meet these tests, then he or she is deemed “non-exempt” and is eligible for overtime pay after working 40 hours in any given week.
For employers, these rule changes created the immediate problem of how to remain compliant with the new rules, yet retain “exempt” status for their white collar employees that make more than $23,600/year, but less than $47,476/year. Possible answers to this question are as follows:
1. Paying Overtime. Employers can pay these “in between” employees straight away overtime for work over 40 hours
2. Salary Increases. In order to avoid the new overtime rules, Employers may increase salaries so that qualified employees earn at least the minimum salary necessary to qualify for the adjusted exempt status.
3. Limiting Overtime. If employees do not work more than 40 hours per week, the issue of overtime becomes moot. So, some employers will be cutting out such opportunities.
4. Salary Decreases. If employers need overtime hours, but cannot afford it, then they may make a downward adjustment in an employee’s base hourly pay to offset the cost of overtime that the employee may need to put in.
The new salary requirements will be automatically increased every three (3) years beginning January 1, 2020, to prevent the requirements from becoming outdated. The DOL also provides that certain highly compensated employees are not eligible for overtime. The minimum highly compensated salary will increase from $100,000 to $134,400.
For more information, please contact the attorneys at BLACK JOHNSON KAUFMAN BLUSTIN, LTD. at 763.441.7040. or visit www.blacklawmn.com.
© 2016 BLACK JOHNSON KAUFMAN BLUSTIN, LTD. ALL RIGHTS RESERVED.
THE INFORMATION CONTAINED IN THIS ARTICLE IS PUBLISHED FOR INFORMATION PURPOSES ONLY. IT
DOES NOT CONSTIUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY CLIENT RELATIONSHIP WITH