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Northwest OH Legal Blog

Friday, September 16, 2016

EMPLOYERS ARE SUBJECT TO NEW OVERTIME RULES BEGINNING DECEMBER 1, 2016

Employers have until Dec. 1, 2016 to implement changes pursuant a new Department of Labor Rule that significantly adjusts overtime Rules and increases the salaries of employees who are eligible for overtime pay.  The changes are pursuant are pursuant to the Fair Labor Standards Act, a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping and child labor standards affecting full-time and part-time workers.

What employers are covered?

Generally, employees of organizations with at least $500,000 of business or gross sales in a year are covered by FLSA. In addition, employees of certain entities are covered by the FLSA regardless of the volume of sales or business done. These entities include the following:

- Hospitals.

- Businesses providing medical or nursing care for residents.

- Schools (whether operated for profit or nonprofit).

- Public agencies.

Nonprofits, schools and institutions of higher education are generally covered by FLSA's minimum wage and overtime provisions.

What employees are covered? (white collared salaried employees)

Employees covered by this Rule are those who are classified as exempt.  Under the FLSA, eligible employees who work more than 40 hours in a week are entitled to overtime pay at a rate not less than one and one-half their regular rates of pay, unless specifically exempted.

Exempt employees (also called white-collar, salaried employees) are excluded from minimum wage, overtime regulations and other rights and protections afforded to nonexempt workers.

To be considered exempt, white-collar employees generally must:

- Be salaried, which means they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed. This is the "salary basis test."

- Be paid more than a specified weekly salary level. The "salary level test."

- Primarily perform executive, administrative or professional duties.

Certain employees, such as doctors, teachers and lawyers, are not subject to either the salary basis or salary level tests.

What is changed under the Rule?

Anyone making less than $47,476.00 a year (except employees noted above) must be paid time-and-a-half once he or she works more than 40 hours in week.  The previous threshold was $23,660. On a weekly basis the new Rule doubles the minimum salary threshold for exemption from $455 per week to $913 per week. It also raises the exemption level for those considered to be "highly compensated employees" from $100,000 to $134,004 annual salary.

Additionally, employers will be able to use nondiscretionary bonuses and incentive payments tied to productivity and profitability -including commissions - to satisfy up to 10 percent of the standard salary level, provided these payments are paid at least quarterly.

The Department of labor estimates this will affect 42. Million Americans, including 134,000 in Ohio and 101,00 in Michigan.

What options do employers have?

Employers have several options for responding to the new Rule. For each affected employee now entitled to overtime pay, employers may do one, or a combination, of the following:

- Increase salary to a new level to meet the duties test and retain his or her exempt status.

- Pay an overtime premium of one and a half times the employee's regular rate of pay for any overtime hours worked.

- Reduce or eliminate overtime hours.

- Reduce base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime hours worked over 40 in the workweek to hold total weekly pay constant.

The new overtime regulations will have a significant impact on some businesses and covered organizations. Employers should use the next several months to analyze their work force to get a better understanding of how to adapt to the new Rule. 


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With offices in Toledo and Lima, OH Allotta Farley Co., L.P.A. serves clients throughout northwest OH with various legal matters. Areas of service include Allen County, Ashland County, Auglaize County, Crawford County, Defiance County, Erie County, Fulton County, Hancock County, Hardin County, Henry County, Huron County, Lucas County, Marion County, Mercer County, Morrow County, Ottawa County, Paulding County, Putnam County, Richland County, Sandusky County, Seneca County, Van Wert County, Williams County, Wood County, Wyandot County.

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