Are you ready yet for the new overtime regulations?

The new federal overtime regulations take affect December 1, 2016. You should act soon to determine if the regulations affect your business.

For an employee to be exempt from overtime, the employee must:

  1. Be paid on a salary basis that is not subject to reduction based on quality or quantity of work;
  2. Be paid a minimum salary set forth in the regulations;
  3. Have primary job duties that fall into either the executive, administrative, or professional job categories as defined by the regulations.

The new overtime regulations only change the salary levels. Effective December 1st, the minimum annual salary will be $47,476 (or $913/week), which is a substantial increase from the current minimum annual salary of $23,660 (or $455/week). The salary threshold will be automatically updated every three years beginning January 1, 2020, which is estimated to be $51,168 in 2020.

Ten percent (10%) of the salary threshold can be met by non-discretionary bonuses, incentive pay, or commissions. The non-discretionary payments must be paid on a quarterly or more frequent basis. An employer can also make a “catch-up” payment at the end of each quarter.

The salary threshold for highly compensated employees will also increase to $134,004 annually. This amount will also be adjusted every three years. An employer will not be able to reach the minimum salary threshold with non-discretionary payments.

The first step is to determine what employees will be effected by the new overtime rules and the financial impact it may have on the company. If you currently have exempt employees that earn an annual salary of less than $47,476, you should consider the following options:

  1. Give the employee a raise to meet the new minimum salary threshold;
  2. Pay the employee overtime at one and half times the hourly rate for any hours worked over 40 hours in a work week;
  3. Reduce the employees working hours to under 40 each week to avoid having to pay overtime;
  4. Re-structure when the work week begins and ends if the employee tends to work an abnormally large number of hours at a given time during the week.

If you have any questions about the new overtime regulations, the employment law team at Goldberg Katzman, is available to help you. Please contact Mike Crocenzi, Esq. at 717-234-4161 or mjc@goldbergkatzman.com with any questions.

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