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06/02/16


New Rules for Paying Employees Overtime

By: Darla J. McClure

Related Attorney(s): Andrew L. SchwartzKaren N. ShapiroDonald N. SperlingJordan G. Savitz

Media Type: Alert

As you may be aware, we have been anxiously awaiting the final regulations relating to changes in overtime rules under the federal Fair Labor Standards Act (FLSA). In May 2016, the Department of Labor announced, as expected, that the minimum salary test for each of three exemptions from overtime – administrative, executive and professional – will more than double from the current minimum of $455.00 per week, or $23,660.00 on an annual basis. The new minimums, effective December 1, 2016,  will be $913.00 and $47,476.00, respectively. The minimum salary for the highly compensated employee exemption increases from $100,000.00 to $134,004.00.  

The final rules allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new salary level.

It is imperative that employers begin the process of analyzing the effect, if any, that the regulations will have on their business. Employers will be faced with either increasing the salaries of those employees for whom they wish to keep as exempt or opting to convert such employees to non-exempt status where the employer will be responsible for the payment of overtime. 

While the duties test remains the same, employers should take the time to review each employee’s job descriptions to make sure that he or she satisfies this test. Since the new salary test will likely result in an increase in lawsuits and Department of Labor complaints, employers will suffer increased scrutiny on all fronts. It is likely that the DOL will pay greater attention to employers’ compliance with the duties test since it is always the more difficult and subjective test. The key is to have a plan to implement and to manage employees’ expectations through these regulatory changes.

If you have questions about changes to the overtime rules under FLSA, or any other employment law issue, please contact a member of our employment law department at 301-340-2020.


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