On November 22, 2016, a federal judge issued a preliminary injunction staying implementation of the new overtime regulation. The new regulation is on hold for now and it will not go into effect on December 1. No word yet on a potential appeal of the injunction.
The changes to the the Fair Labor Standards Act (FLSA) that were scheduled to become effective on December 1, 2016 are as follows:
- The salary threshold for an exempt employee, i.e., an employee exempt from overtime payments, is raised from $455 per week, or $23,660 per year. The new salary threshold for an exempt employee is $913 per week, or $47, 476 per year.
- Non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly, can count for up to 10% of the standard salary threshold.
- The “duties” test for an exempt employee does not change. To be exempt, the employee must have executive, administrative, or professional duties as defined in the law and regulations.
- So, to be an exempt employee for overtime purposes, the employee must be paid a salary of at least $47,476 per year, AND have executive, administrative, or professional duties as those terms are defined by law.
The minimum salary threshold will automatically increase every three years based on wage growth. The first automatic increase will be effective on January 1, 2020.
- The salary threshold for Highly Compensated employees is increased from $100,000 to $134,004. As in the past, these employees come under a relaxed duties test.
- Non-exempt employees must still be paid overtime for all time worked in excess of 40 hours per week. This would apply to all non-exempt employees, whether paid hourly or by salary. This, of course, is not a change since all non-exempt employees have been entitled to overtime for time worked in excess of 40 per week. But it is important to emphasize the necessity of accurate systems in place to track and record all time worked by employees.