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Overtime Ruling Thrown into Uncertainty

The overtime rule that was supposed to take effect on December 1st has been blocked by a federal judge in Texas last week.

The rule, which was set to take effect on Dec. 1, 2016, would have increased the salary threshold for the “white collar overtime exemptions” to $47,476 per year. The judge’s ruling gives employers across the country a reprieve from having to raise salaries for exempt employees to the new threshold or pay them overtime.

An appeal is possible and the DOL said in a statement it would review the courts order. In the meantime, we will keep you updated on any new developments. If you have any questions, feel free to contact your Linkenheimer CPA.

Department of Labor Issues New Overtime Payment Rules

On May 18, 2016, President Obama and Secretary Perez announced the publication of the Department of Labor’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation.

Key Provisions of the Final Rule

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:

Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the Final Rule amends the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent […]