Earlier this month, the Obama administration announced a new overtime rule that make millions of workers eligible for overtime pay. The current rule, implemented more than a decade ago, exempts executive, administrative, or professional employees (EAP) who earn more than 455 per week or $23,660 per year from the federal overtime requirement.

The new rule, scheduled to go into effect on December 1st of this year, would raise these thresholds to $913 per week or $47,476 per year. Once implemented, an employee who earns less than this amount and not otherwise exempt will be entitled to time-and-a-half pay for any hours worked in excess of 40 hours per week.

The new rule also raises the overtime threshold for highly compensated employees. Under the old rule, people who made more than $100,000 per year were exempt from FLSA’s overtime requirement  the new rule raises this threshold to $134,000, meaning that many high-wage workers who are not in EAP positions will be now be eligible for overtime pay.

According to the United States Department of Labor (DOL), the new rule will extend overtime pay benefits to some 4.2 million workers who are currently exempt. In addition, it will reduce the number of workers whose entitlement to overtime pay depends on their jobs duties being classified as not administrative, executive, or professional.

The salary levels used in the new rule are set at the 40 percentile of full-time salaried workers in the lowest wage census region, which is currently the South. Under the new rule, the salary and compensation levels will be automatically updated every three years in order to maintain them at the 40th percentile.

What does the New Rule Mean for Employers?

The new rule will significant increase the number of administrative, executive, and professional workers who will be entitled to overtime pay under the Fair Labor Standards Act by making workers who are paid between $23,660 and $47,476 per year eligible. For this reason, unless an employer raises wages of employees whose salaries fall within this range to the minimum salary level, they will need to pay workers time-and-a-half for any hours worked in excess in a particular workweek. To avoid the additional costs associated with the new rule, many employers may choose to adjust their employees work schedules or to eliminate overtime hours for employees who will be eligible for overtime pay under the new rules.

Compliance with federal overtime rules is critical, so it is advisable for employers who thinks that the rules will affect their business to speak with an attorney before taking any action.

Contact a Mountain View Small Business Attorney Today to Schedule a Consultation

If you are a small business owner who is concerned about how the new federal overtime rule may affect you, you should discuss your situation with an experienced attorney immediately. To schedule consultation with small business attorney Claire Kalia, please call our office today at 650-701-7617 or send us an email through our online contact form.

- Claire Kalia

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