Today, the Department of Labor (DOL) announced the issuance of the final overtime rule. This is a major change to the way companies pay their employees. Employers must pay close attention to the requirements of the final rule and possibly make significant changes to their employment practices before the rule takes effect on December 1, 2016.
The Fair Labor Standards Act provides that employees meeting certain duties tests are exempt from the law’s overtime payment requirements for hours worked in excess of 40 hours per week if they are paid a weekly salary. The Final Rule updates the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Raises the standard salary level to $913 per week; $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years.
In addition, the Final Rule amends the salary basis test so employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
Employers have flexibility as to how they will comply with the new requirements. First, employers will have the option of paying employees at the same salary as before but pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked. Second, employers can increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status. Third, employers can reduce or eliminate overtime hours or reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant.
Offit Kurman’s employment attorneys have been closely following the changes to the overtime rules and can help your business establish a plan to remain compliant with the new rules while still meeting your business’ needs.
Please feel free to reach out to any of us to answer any of your concerns.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.
You can connect with Offit Kurman via our Blog, Facebook, Twitter, Google+, YouTube, and LinkedIn pages. You can also sign up to receive Law Matters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
MARYLAND | PENNSYLVANIA | VIRGINIA| NEW JERSEY | NEW YORK | DELAWARE | WASHINGTON, DC