President Obama on Tuesday May 17, 2016, unveiled a new rule that will increase the overtime pay exemption from $23,660 to $47,476 for executive, administrative, and professional employees. This rule change is expected to make about 4.2 million US workers eligible to receive overtime pay for each hour they work beyond the 40 hour work week.
The overtime pay rule basically states that workers being paid a salary above the exemption amount do not need to be paid time-and-a-half for working over 40 hours per week. The rule is intended to exempt salaried management employees from overtime pay rules. However, the increase in the exemption amount will potentially make many more workers eligible for overtime pay.
Industries with many management workers with salaries below the new threshold will need to implement a plan for complying with the rule. It is expected that the greatest impact will be on nonprofit groups, retail companies, convenience stores, hotels, and restaurants, but every business will need to review their compensation structures and employment relationships to ensure compliance. The rule will take effect December 1, 2016.
11/23/2016 UPDATE: A federal judge in Texas issued a temporary injunction against implementation of the new rules. This delay puts it into question of whether the new rules will be implemented at all given the inauguration of a new administration in January. Businesses and nonprofits should seek professional counsel before making any major changes to their compensation structures in light of this last minute change.
Our attorneys are experienced in advising businesses and nonprofits on employment matters and are here to help. To schedule an appointment or for more information, call (507) 288-5567 or send us an email.