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Employers Beware -- Dramatic Changes to Overtime Rules Coming Soon

 

According to federal law (the Fair Labor Standards Act), an employer need not pay an employee overtime compensation for hours worked in excess of 40 in a workweek if: (1) the employee engages in certain workplace "duties" described in exemptions to the law; and (2) the employee is paid on a "salary basis" -- a predetermined salary not subject to most deductions. 

Currently, the salary basis test is satisfied if an employee receives at least $455 per week ($23,660 annually). 

Today, President Obama and Secretary of Labor Thomas Perez announced the Publication of the Department of Labor's Final Rule dramatically increasing the minimum salary required for purposes of satisfying the salary basis test.  

The new minimum salary required to satisfy the salary basis test will increase to $913 per week ($47,476 annually). 

The new rule takes effect December 1, 2016.

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CRITICAL TAKE AWAY:  What this means for employers, quite simply, is those employees who are presently paid less than $913 per week or $47,476 annually and who are currently treated as exempt employees under the wage and hour laws MUST either: (1) be reclassified as non-exempt employees and receive overtime compensation for all hours worked in excess of 40 hours per week; or (2) have their salaries increased to at least $913 per week or $47,476 annually.  This is a material change in the law and will require most employers to reclassify employees or increase salaries.

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