New Overtime Salary Threshold Will Become Effective December 1, 2016

The US Department of Labor has issued new overtime rules.  Effective December 1, 2016, most American workers who earn less than $913 per week ($47,476 per year) will be eligible for overtime pay (1.5 times regular hourly pay) when they work more than 40 hours in a week.

Key provisions of the rule are as follows:

  • The new salary threshold will become effective on December 1, 2016.
  • Most employees who earn less than $913 per week will earn overtime pay (1.5 times regular hourly pay) for hours worked over 40 in a week.
  • Bonus, incentive pay and commissions can be factors in determining whether the salary threshold is met.
  • For employees earning over $913 per week ($47,476 per year) and less than $134,004 per year, eligibility to earn overtime for hours worked over 40 in a week will depend on the employee’s duties. The duties tests will be addressed in future postings.
  • Most employees earning over $134,004 per year, who are often referred to as highly compensated employees, will not be eligible to earn overtime, regardless of their duties.
  • The salary threshold will automatically increase every 3 years, based on the 40th percentile of earnings of full-time salaried workers.

Because some of the analysis of the new overtime rules can be complex, and the penalty for an error can be severe, counsel should be consulted before a determination is made that an employee is not eligible for overtime pay under the new rules.

The analysis set forth in this article is provided for general understanding only and should not be considered legal advice.  Counsel should be consulted regarding any specific legal issues.


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