2016 New Overtime Rules – What Businesses Need to Know

2016 New Overtime Rules – What Businesses Need to Know

On December 1, 2016, new rules will go into effect regarding overtime under the Fair Labor Standards Act (FLSA). Under the FLSA, most hourly and salaried blue-collar workers are entitled to time-and-a-half pay when they work more than 40 hours in a week. However, the FLSA also contains several exceptions to this rule. The most common is the “white collar exemption” – an exception for higher-paid workers who generally have better benefits, job security, and opportunities for advancement, who generally meet three criteria:

  1. First, they must be paid on a salary basis (rather than hourly, for example).
  2. Second, they must pass the “job duties” test, meaning that they perform the type of work associated with exempt executive, administrative, or professional employees.
  3. Third, their salary must meet the “minimum salary threshold” established by the Department of Labor. The biggest change that will occur on December 1 is this amount will be raised to $913 per week, or $47,476 per year, almost double the current threshold amount. Most employees earning less than $913 per week will be entitled to overtime once the new law goes into effect, regardless of whether they are salaried or pass the “job duties” test.

Bonuses and Commissions – The new law will permit up to ten percent of the white collar exemption salary threshold to be met by non-discretionary bonuses, incentive pay, or commissions, provided these amounts are paid on at least a quarterly basis.

Exceptions – Some types of employees may fall into another exemption under the FLSA, which does not require them to pass the white collar salary threshold test; therefore, these employees will not be affected by the new regulations. These types of employees include among others:

  • Outside Sales Employees
  • Drivers who fall under the motor carrier exemption.
  • Doctors, Lawyers, Teachers

“Highly Compensated Employee” (HCE) Threshold – Another change is to the salary threshold for the “highly compensated employee” exemption which is currently $100,000 per year, with at least $455 per week on a salary or fee basis. That amount will be raised to $134,000 per year, with at least $913 per week on a salary or fee basis.

 Future Planned Increases – Employers should prepare for the minimum threshold amounts for both the white collar and the HCE exemptions to change regularly every three years, beginning January 1, 2020.

 Options for Businesses after December 1, 2016 – For employees who do not currently receive overtime, but may be eligible after December 1, employers may opt to:

  • Raise Salaries
  • Pay Overtime, and/or
  • Cap Hours and Hire Part Time Employees

This article provides general information only. A more detailed summary is available by email to quinn@lockequinn.com or dean@lockequinn.com Locke & Quinn provides employment law services. Article provided by Kati Kitts Dean, Esq. and Colleen M. Quinn, Esq. at https://plus.google.com/+LockeQuinnColleenMQuinnRichmond/about


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2016 New Overtime Rules – What Businesses Need to Know


On December 1, 2016, new rules will go into effect regarding overtime under the Fair Labor Standards Act (FLSA). Under the FLSA, most hourly and salaried blue-collar workers are entitled to time-and-a-half pay when they work more than 40 hours in a week. However, the FLSA also contains several exceptions to this rule. The most common is the “white collar exemption” – an exception for higher-paid workers who generally have better benefits, job security, and opportunities for advancement, who generally meet three criteria:

  1. First, they must be paid on a salary basis (rather than hourly, for example).
  2. Second, they must pass the “job duties” test, meaning that they perform the type of work associated with exempt executive, administrative, or professional employees.
  3. Third, their salary must meet the “minimum salary threshold” established by the Department of Labor. The biggest change that will occur on December 1 is this amount will be raised to $913 per week, or $47,476 per year, almost double the current threshold amount. Most employees earning less than $913 per week will be entitled to overtime once the new law goes into effect, regardless of whether they are salaried or pass the “job duties” test.

Bonuses and Commissions – The new law will permit up to ten percent of the white collar exemption salary threshold to be met by non-discretionary bonuses, incentive pay, or commissions, provided these amounts are paid on at least a quarterly basis.

Exceptions – Some types of employees may fall into another exemption under the FLSA, which does not require them to pass the white collar salary threshold test; therefore, these employees will not be affected by the new regulations. These types of employees include among others:

  • Outside Sales Employees
  • Drivers who fall under the motor carrier exemption.
  • Doctors, Lawyers, Teachers

“Highly Compensated Employee” (HCE) Threshold – Another change is to the salary threshold for the “highly compensated employee” exemption which is currently $100,000 per year, with at least $455 per week on a salary or fee basis. That amount will be raised to $134,000 per year, with at least $913 per week on a salary or fee basis.

 Future Planned Increases – Employers should prepare for the minimum threshold amounts for both the white collar and the HCE exemptions to change regularly every three years, beginning January 1, 2020.

 Options for Businesses after December 1, 2016 – For employees who do not currently receive overtime, but may be eligible after December 1, employers may opt to:

  • Raise Salaries
  • Pay Overtime, and/or
  • Cap Hours and Hire Part Time Employees

This article provides general information only. A more detailed summary is available by email to quinn@lockequinn.com or dean@lockequinn.com Locke & Quinn provides employment law services. Article provided by Kati Kitts Dean, Esq. and Colleen M. Quinn, Esq. at https://plus.google.com/+LockeQuinnColleenMQuinnRichmond/about

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