Overtime Rules

On May 18, 2016, the United States Department of Labor (DOL) published details regarding changes to the Fair Labor Standards Act (FLSA) overtime rules. The new overtime rules were set to go into effect on December 1, 2016. However, just 10 days before the deadline, a federal judge issued a nationwide preliminary injunction on the Department of Labor's new overtime rules. 

Employees must decide whether they are going to move forward with the changes they have been planning or put those changes on hold. There has not been a final ruling in the case, and the new rules have not been thrown out or invalidated - at least not yet.

Key Provisions

While the job duties component of overtime eligibility will remain the same, the rules double the salary level used to determine whether employees can be properly classified as exempt from overtime. The rules set the standard salary level at the 40th percentile of earnings of full-time salaried workers, or $47,476 annually ($913 per week). Up to 10% of this income may come in the form of non-discretionary bonuses, incentive pay, or commissions, as long as that portion of the compensation is paid at least quarterly. 

Additionally, the new rules set the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers, or $134,004 annually.

The overtime rules also establish a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Possible Amendment

As of May 1, 2017, There is a new bill in the Senate, dubbed the Working Families Flexibility Act, that would amend the current Fair Labor Standards Act (FLSA) by permitting employers to offer paid time off as an alternative to time-and-a-half overtime wages. If the act becomes law, an option would be created whereby employers and employees could voluntarily agree to one-and-a-half hours of paid time off for every one hour of overtime worked. The bill proposes capping the number of leave hours at 160. Further action is expected in the coming weeks. However, employers should remain mindful of the requirement to comply with the FLSA as it currently exists.

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