Employers Should Act Now to Comply With New Overtime Regulations – Effective December 1, 2016

October 25, 2016 – Eric Barth, Member

The key provisions of the new rule are:

1. The salary level for EAP employees will increase from $455/week to $913/week (i.e., $47,476/year).
2. Non-discretionary bonuses, incentive payments, and commissions can be used to satisfy up to 10% of the new salary level, but only if they are paid at least quarterly.
3. The total annual compensation requirement for highly compensated employees will increase from $100,000/year to $134,004/year.
4. These levels will automatically increase every 3 years. The next increase will take effective on January 1, 2020.

So what does that mean for employers? It means employers need to act now to identify any exempt employees who are currently below the new standard salary level as well as any highly compensated employees who are below the new highly compensated employee annual compensation level. These new changes will affect nearly every employer, but the amount of change will vary.

After identifying those employees who will be affected by the rule changes, employers will be in a better position to determine whether any changes to pay or hours are necessary.  Employers may choose to:

• Increase salaries of employees who meet the duties test and whose salaries are close to the new salary level and who regularly work overtime to maintain their exempt status;
• Continue paying employees their current salary and pay overtime for hours worked in excess of 40 per week;
• Adjust wages; or
• Reorganize workloads, adjust schedules or spread work hours across current staff or possibly new employees.

The particular facts of each situation will determine how employers should best respond to comply with the new overtime regulations.

Once you determine how to best comply with the rule changes, some items you’ll want to evaluate are your employee handbooks, job descriptions and hiring processes, just to name a few.

With only a little over a month left before the new rules go into effect, employers should act now to evaluate what changes are needed to be in compliance.

For more information about the new regulations or to discuss compliance strategies, contact attorneys Eric W. Barth, James C. Spencer, Mitchell L. Herren, David M. Rapp, or Christopher L. Arellano at 316.267.2000.