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Important Announcement On New Overtime Rules

On May 18, 2016, the Department of Labor published the long awaited “Final Rule” concerning the new overtime regulations. Although the Final Rule was recently published, the new overtime regulations do not go into effect until December 1, 2016. The biggest changes are as follows: 1. Salary Threshold Increased: The salary threshold was increased from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). This means that beginning on 12/01/2016, any worker earning less than $47,476 annually can no longer be paid on a salary basis and must be paid overtime. This is the biggest change and the one that will affect many of our clients. Expected employer responses are: a. Reclassify any affected employees earning $47,476 or less annually as hourly “non-exempt” and pay them overtime. b. If any affected employees are close to the threshold, give them a raise to place them at or over the new $47,476 annual threshold and keep them as “exempt”. c. Reduce the hours of any affected employees to less than 40 hours a week so overtime is not an issue. 2. Highly Compensated Employee (HCE) Threshold Increased: The HCE threshold was increased from $100,000 per year to $134,004 per year. Many, if not most, HCE’s are exempt from overtime because they often perform executive, administrative, and professional (“EAP”) duties. However, some employees were highly compensated but did not spend the majority of their time performing EAP duties. Under the old rule, those employees would still be exempt from overtime if they earned $100,000 or more per year. Under the new rule, going into effect on 12/01/2016, those employees must earn $134,004 or more per year to be exempt from overtime. 3. Automatic Adjustments Every 3 Years: The DOL has put in place a mechanism so the Salary Threshold and HCE Threshold are automatically adjusted every 3 years. 4. Nondiscretionary Bonuses & Incentive Payments can be Included – but only up to 10% of the required salary amount. For more detailed information, go to the Department of Labor’s webpage at: https://www.dol.gov/whd/overtime/final2016/

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