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Obama Administration Announces Significant Overtime Changes

May 18, 2016

The Obama Administration announced, yesterday, a new final Labor Department regulation which substantially changes the salary required for certain exempt employees.

Previously, certain employees were exempt from overtime rules if they earned a salary of at least $23,660 per year, or $455 per week. The new rule increases the salary required for these exempt employees to $47,476 per year, or $913 per week.

This means that certain formerly-exempt employees who earn salaries of less than $47,476 will be eligible for overtime pay. Employers will need to analyze their exempt positions carefully to determine whether it will be more cost-effective to increase an employee’s annual salary to at least $47,476, or to pay an employee earning less than that amount an hourly wage plus overtime at 1.5 times the hourly wage for hours worked over 40 hours in a work week, or cap that employee’s hours worked at 40 hours per work week.

The new rule also requires that the salary threshold will increase automatically every three years and also allows bonuses and incentive payments to count toward up to 10% of the new salary level.

The new rule will take effect December 1, 2016. If you need assistance analyzing this issue for your workforce, please call one of Blethen, Gage & Krause’s employment law attorneys – Julia Ketcham Corbett, Beth Serrill or Kevin Velasquez at 507-345-1166.

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