On May 18, the federal Department of Labor issued a new overtime rule that, when it takes effect, will automatically extend overtime eligibility to four million employees who are currently paid on a salary basis.
The rule, which was initiated by Presidential Memorandum in 2014, raises the salary at which employees must be compensated to be eligible for a “white collar exemption” under the Fair Labor Standards Act. In most cases, in order to classify an employee as “exempt” from the FLSA’s overtime requirements, an employer must pay that employee at least $455 per week (or about $23,660 per year).
Under the new rule, which goes into effect on December 1, 2016, that minimum threshold more than doubles, so that salaried employees will have to earn at least $913 per week ($47,476 per year) to be considered exempt from the FLSA’s overtime requirements. Employees who make less than that will be entitled to time and a half overtime pay.
We expect the new rule may cause some significant concerns for employers and employees, including not only concerns about increased payroll costs, but also questions of benefit plan eligibility, scheduling flexibility, and position responsibility. To complicate matters further, some opponents of the rule are also considering various legislative efforts to block its implementation.
For questions about the status and the requirements of the new rule, or for assistance working through some of the issues the new rule is likely raise, please contact one of the attorneys in Dunkiel Saunders’ health and employment law practices.