Overtime exemption threshold is set to double, from $455 per week to $913
by Tina Vannucci & Denis Fitzgibbons, Fitzgibbons Law Offices
In a move affecting many employers, the Labor Department recently announced a sharp increase in the minimum salary requirement for employees to be exempt from overtime pay.
Whether workers are exempt from overtime or non-exempt depends, in part, on their duties. Executive, administrative and professional employees are generally considered exempt. However, in addition to satisfying the “duties test,” to be exempt the employee must be paid a salary of at least $23,660 a year ($455/week).
On Dec. 1, the minimum required salary for overtime-exempt employees will more than double, to $47,476 per year ($913/week), and many employees who are currently exempt may soon be entitled to overtime pay.
Example: You pay an exempt employee a $500 weekly salary. In an average week, that employee works 50 hours. Under the new rules, that employee’s $500 weekly salary will be $413 below the $913 weekly minimum to qualify for the overtime exemption. If the employee continues to work 50 hours a week at $12.50/hour, that employee will be entitled to 10 hours of overtime pay at $18.75/hour, raising the weekly pay to $687.50.
To prepare for this change, employers should take a number of steps.
First, determine whether employees really are exempt. If they do not satisfy the duties test, change their status to non-exempt.
Second, if your employee meets the duties test but is not close to the new salary minimum, consider whether you will raise his or her pay to remain exempt. If the employee does not regularly work more than 40 hours a week, it may be less expensive to pay overtime instead.
Third, for a currently exempt employee who works many hours but whose base weekly salary is less than $913, determine whether to lower the hourly rate so that, with overtime, he or she will continue to earn roughly the current amount.
Fourth, employers should also be stricter in limiting overtime and determine which employees can be capped at 40 hours.
Finally, to avoid excessive overtime, consider adding full- or part-time employees.
For assistance in working through the new regulations, contact Fitzgibbons Law Offices (520-426-3824).