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How to Plan for the New FLSA Overtime Rules

Author: Deborah J. Tibbetts, Esq.

Effective December 1, 2016, new regulations from the US Department of Labor (DOL) will make several changes to the Fair Labor Standards Act (FLSA).

  • Salary threshold: The minimum salary level for most overtime-exempt employees will increase to $47,476 per year ($913 per week) from the current $23,660 per year ($455 per week).
  • Incentive pay: Up to 10 percent of the salary minimum may come from nondiscretionary bonuses, incentive payments and commissions, paid at least quarterly, with a provision allowing an employer to make a "catch-up" payment each quarter if an employee's average weekly salary falls below the minimum.
  • Highly compensated employees: The minimum salary level for highly compensated employees (who may still qualify for an overtime exemption even if they perform fewer exempt duties) will increase to $134,004 per year from $100,000 per year. Of that amount, at least $913 per week must be paid on a salary basis.
  • Computer employees: The minimum salary that must be paid to overtime-exempt computer employees will be increased to $913 per week, but the existing alternative hourly rate of $27.63 is left intact.
  • Tri-annual adjustments: The minimum salary levels will be automatically adjusted every three years, starting in 2020.

As a result of the new regulations, most salaried employees paid less than $47,476 per year ($913 per week) will be automatically entitled to overtime.

To plan for the impact of the new DOL regulations, a prudent employer should be guided by the steps set forth below.