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The Nuts and Bolts of the New Overtime Rule By G. Thompson Bell, III, Esquire

On May 18, 2016, the U.S. Department of Labor finalized a new rule that will make several million additional workers eligible for overtime pay. The rule takes effect December 1, 2016. The federal Fair Labor Standards Act (FLSA) requires employers to pay employees 1½ times their hourly rate for each hour they work in excess of 40 in a work week, unless the employee either is exempt from the overtime provisions of the FLSA or falls within one of the FLSA’s exceptions. To be exempt, employees must perform duties that fall into one of the exempt categories: executive, administrative, professional (sorry lawyers, unless you’re under the salary threshold, you’re not getting overtime pay), outside sales, highly compensated, and certain IT positions. Each of these categories has a somewhat complicated definition against which the duties an employee performs must be analyzed to determine eligibility for exemption. These categories and definitions are not affected by the new rule. 12 | Berks Barrister

Exempt employees also must satisfy the “salary test.” The salary test has two requirements. The first is that the employee must be entitled to receive a predetermined amount of compensation each pay period regardless of how much time the employee works during that period, with a few exceptions. The second is that the predetermined amount of compensation must exceed a weekly threshold. That’s where the new rule comes in. Since 2004, the threshold has been $455 per week or $23,660 per year. The new rule raises the salary threshold to $913 per week or $47,476 per year, just about twice the prior threshold. And, unlike the prior rule, the new threshold will be adjusted every three years to account for wage inflation. The Department of Labor estimates that about 4.2 million workers, who were not previously eligible for overtime pay, will become eligible under the new rule. Millions of other workers also will benefit from the new rule because it is expected that employers will increase the salaries of some workers to satisfy the new threshold and, thereby,

The Berks Barrister | Summer 2016  

The Berks Barrister is the official publication of the Berks County Bar Association. www.berksbar.org. The Berks Barrister is published by H...

The Berks Barrister | Summer 2016  

The Berks Barrister is the official publication of the Berks County Bar Association. www.berksbar.org. The Berks Barrister is published by H...