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Firm news and client alerts that may be beneficial
On May 18, 2016, the US Department of Labor (“DOL”) issued final rules that modify the current overtime pay guidelines and push millions of formerly exempt employees into non-exempt status. These rules will go into effect on December 1, 2016, giving employers a significant amount of time to learn the rules and, if possible, develop strategies to offset the additional costs they will otherwise incur in compensating employees for their overtime work.
The federal Fair Labor Standards Act requires an employee to be paid overtime pay, at 150% of regular pay rates, for time worked over 40 hours in any week, unless the employee fits within one of the following exemptions:
Those employees described above who meet the duties test and received compensation above the thresholds specified are “exempt” employees, meaning the employer does not have to pay the employee overtime rates.
The new rules do not alter the duties tests (the proposed changes issued in 2014 indicated the DOL’s openness to modify the rules to limit further the duties required to meet the exemption). But, the dollar thresholds specified above have been significantly increased, which will broaden the number of non-exempt employees eligible for overtime pay.
Just as important, for the first time, these dollar thresholds will automatically increase every 3 years (the next increase to take effect January 1, 2020) without going through the rule-making process. The last adjustment in the thresholds occurred in 2004, and undoubtedly the burden of the rule-making process contributed significantly to DOL’s inertia in this area, enabling employers to lessen the threat to their profitability. The new rule’s adoption of cost of living increases eliminates this advantage to employers.
These new rules will force more labor costs upon employers at a time when already thin margins have greatly impacted employers’ ability to hire more employees and expand their businesses. We recommend employers take this opportunity to review their current labor arrangements and consider some of the following options to avoid, or at least minimize, the new rules’ potential impact:
We are glad to review these rules with you and determine how to address them within your business structure.
To view this article in PDF format, please click here [ Overtime Rules Modified by U.S. Department of Labor].
Since 1979, the Syracuse-based law firm of SCOLARO FETTER GRIZANTI & McGOUGH, P.C. has provided sophisticated tax, business, litigation, employee benefits, estate and trust planning and administration services to its individual, business, entrepreneurial and professional clients throughout New York, Pennsylvania, Florida and other states in which its attorneys are admitted to practice.