New Standards Governing Wage and Overtime
The Wage and Hour Division of the US Department of Labor (DOL) released new standards governing the wage and overtime eligibility regulations for all employers. The DOL recommended changes to the regulations under the Fair Labor Standards Act (FLSA), which determines an employee's eligibility for earning overtime pay.
If you are an employer, these changes will apply to your organization. Employers are encouraged to review their current workforce immediately to determine which employees are affected, whether to re-classify those employees, and execute a communications strategy. Human Resource professionals and management should keep in mind the periodic adjustments and set a regular review process.
1. Salary Threshold Changed to $913/week ($47,476 per year)
Employees earning less than $47,476 per year will become eligible for overtime pay. This threshold doubles the current salary threshold level; from $455 a week ($23,660 for a full-year employee). An increase this large encompasses many employees that are currently classified as exempt.
2. Automatic Salary Threshold Increases Every 3 Years
The new salary threshold will be adjusted every 3 years to maintain a level at the 40th percentile of full-time salaried workers in the lowest-wage Census region. Automatic updates do not allow the government to take into account changing economic conditions, specific impact on certain industries, or regional differences.
3. Duties Test is Unchanged
The current so-called "duties test" that determines whether or not certain employees are eligible for overtime will remain unchanged, even if they make more than the new $47,476 threshold amount. To be eligible for this exemption, an employee's job duties must primarily involve executive, administrative, or professional duties as defined by DOL's regulations.
4. Effective Date is December 1, 2016
The US Chamber of Commerce and SHRM advocated for a longer implementation period and the final rule provides some additional time for employers to prepare. This is longer than the original proposed 60 day period, but is still approaching very quickly.
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