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New Overtime Rule Finalized

Not all employees are entitled to overtime pay for working more than 40 hours per week. Employees can be exempt from overtime pay provisions for a variety of reasons. Employees categorized as executive, administrative or professional may be exempt, if their job duties and salary meet basic requirements. The Department of Labor recently announced a final rule that changes the minimum salary level at which an employee can become exempt. According to the DOL press release, the new rule will move more than 4 million workers from exempt to non-exempt, meaning they are now entitled to receive overtime pay when they exceed the 40-hour workweek.

The new rule raises the salary floor applied to salaried workers. Workers cannot be considered exempt if their salary places them below the 40th percentile in earnings among full-time, salaried workers in the lowest paid region of the country. At the moment, that places the salary floor at $47,476 per year. An employee who is considered management, and therefore exempt from overtime rules, must make at least this much annually to continue to be exempt from overtime pay provisions. Employers will have to choose between limiting the hours of these workers, paying them overtime, or raising their salaries above the new minimum to avoid running afoul of U.S. labor laws. 

The salary floor for highly-compensated workers is also changing. Under the old rules, a worker making more than $100,000 annually who primarily performed office or non-manual work, and who performed work that was executive, administrative or professional in nature was considered exempt. The salary minimum for this classification is being raised to the 90th percentile of full-time salaried workers nationwide, which is at present $134,004. The salary floors for these exemptions will be updated automatically every three years, under the new law.

Employers have a few months to prepare for the changes in calculating overtime pay. The final rule takes effect on December 1, 2016. After that, employers who continue to deny overtime pay to qualified workers will be in violation of the law. Affected employees are encouraged to contact an attorney if they believe they are being unfairly denied overtime compensation.

Source: U.S. Department of Labor Wage and Hour Division (WHD), "Final Rule: Overtime" May 2016 

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