The United States Department of Labor has announced significant new rules governing overtime pay under the Fair Labor Standards Act. The department estimates that 4.2 million workers who are currently exempt from overtime laws will become entitled to overtime when the rules take effect on December 1, 2016.
Here is a basic Q & A about the new regulations.
Q1. What do the new overtime regulations provide?
A: In general, for an employee to be classified as “exempt” from the overtime laws (meaning the employee is not entitled to extra pay for working more than 40 hours per week) you must show that:
1- The duties of the employee qualify for one of the so-called “white collar” exemptions: administrative; professional; or executive. There are other possible exemptions as well.
2- The employee is guaranteed a fixed salary each week worked, regardless of how many hours he or she works.
3- The amount of the salary, effective December 1, 2016, must be at least $47,476 per year ($913 per week). At present, the minimum salary for exemption is only $23,600 ($455 per week). This is the main change made by the new regulations.
There is also a separate exemption for “highly compensated employees,” who can be exempt even if they do not qualify as administrative, professional or executive, so long as they earn a salary of $134,004 per year effective December 1, 2016 by the new regulations. The previous requirement for such employees was a salary of $100,000.
The new regulations also allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the $47,476 salary requirement.
For the first time, the minimum salary levels will update automatically every three years, beginning on January 1, 2020.
Q2. When do the new regulations take effect?
A: December 1, 2016.
Q3. What is the practical effect of the new regulations?
A: For employees who are currently exempt but earn less than $47,476 per year, employers must do one of the following by December 1, 2016:
1- increase the salary to the new level, to retain exempt status.
2- reclassify the employee as nonexempt and pay them time and a half for all overtime hours.
Q4. Which employers need to comply with the regulations?
A: All employers covered by the federal Fair Labor Standards Act and/or the Massachusetts overtime law, which means the vast majority of employers in Massachusetts.
Q5. What happens if an employer does not comply?
A: Employers who do not comply with state and federal overtime law are subject to liability in two ways. First, state and federal labor agencies can investigate and impose penalties, including the payment of back wages. Perhaps of greater concern, companies can be sued by current and former employees for triple damages and attorney’s fees. Such lawsuits are increasingly common, and can be brought as class or collective actions on behalf of a group of employees. This makes it very important for employers to be be sure that all employees are correctly classified as exempt or nonexempt.
Q6. How can I get more information about the new overtime regulations?
A: Here is a link to the Department of Labor’s web site:
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