Major Change in Overtime Pay Exemption - Garcia-Martin & Martin, P.C.

The definition of who is exempt from overtime pay is about to change, quite dramatically. Effective December 1, 2016, the threshold for those who are exempt from overtime wages more than doubles from $455 per week to $913 per week. President Obama announced his final ruling in mid May of this year, automatically extending overtime protection to more than 4 million Americans within the first year of the rule taking effect. As an employer, you may share in the same sentiment as the President, to ensure fair compensation for every worker. But what does this mean for you, the business owner? Well here are several takeaways/provisions from this ruling.

Certain previously exempt employees (i.e. Managers and Professionals) must now be paid at least $913 per week (or $47,476 per year) to be exempt from overtime.
Non Discretionary Bonuses and incentive payments can now satisfy up to 10% of the standard salary level. For employers to count a bonus or incentive payment towards a salary level, they will be required to make such payments quarterly, at a minimum. Yet, it does allow an employer to make a “catch up” payment. Because employers are already permitted to fulfill almost two-thirds of the total annual compensation requirement with commissions, non-discretionary and discretionary payments, the Department of Labor deemed using more than 10% of these commission and additional payments inappropriate.
The Department of Labor will increase the salary threshold every three years. Based on current projections, the salary threshold is expected to rise to more than $51,000.
This rule extends overtime protections to more than 4 million workers who are not currently eligible under federal law.
This rule does not change the duties test for any exemption.

Do you know if your business meets the minimum requirements for employee compensation and whether your salaried employees will be exempt from overtime pay? You probably need to also take a look at all of your employees to get a clear picture of who might be hourly and who is considered salary. Ultimately, however, you’ll need to be compliant with this ruling, on or before December 1. Having an experienced employment attorney to navigate you through this new ruling, can save you the headache dealing with a time consuming and expensive lawsuit. It’s always better, and almost always less expensive, to plan ahead and mitigate your business liability by being in compliance than to wait until litigation is knocking at your door.

Garcia-Martin & Martin, P.C., is a business and employment law firm located in Sugar Land, Texas. Their attorneys work with businesses and individuals in all types of business and employment matters throughout the Houston, Texas area. They can be reached at (281) 277-3066. You may also visit their website at www.mgmartinlaw.com for additional information and practice areas.