Big Changes in Employee Classification Laws Affect Overtime Pay
Could the number of employees who must be paid overtime increase dramatically as a result of new regulations issued by the Department of Labor? The answer is undoubtedly yes, and understanding the new laws could be the difference between a smooth next few months or a lawsuit from an employee owed overtime pay. Specifically, the new regulations affect the availability of overtime pay for white collar employees. The government classifies salaried employees who earn above a certain amount each week and perform specific types of job duties as exempt from overtime pay. “Professional” employees are also exempt. Non-exempt employees must be paid overtime.[1]
The change in law, which goes into effect on December 1, 2016, drastically raises the salary cutoff for overtime pay from $455 per week to $913 a week ($47,476 a year).[2] This means that salaried workers with white-collar-type duties who earn less than $913 a week must be paid overtime when they work more than 40 hours in a week.
While employees may celebrate at the prospect of available overtime pay, employers must be careful to understand and implement the new laws quickly and effectively. Often, employers mistakenly classify employees as exempt when they are actually non-exempt, or vice versa, leading to payment errors.
Tax consequences flow from the laws as well. Overtime pay could change employees’ income over time. Employers may need to increase companies’ income to afford the increased overtime pay or limit certain workers to only 40 hours a week of work. With the regulations taking effect at the end of the year, now is the time to plan ahead, check with the experts, and understand how the new employee classification regulations will affect you.
— By Julia Damron, Esq., Barnes Law
Julia Damron is an associate attorney with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Fact Sheet #23: Overtime Pay Requirements of the FLSA“, U.S. Department of Labor, Wage and Hour Division, https://www.dol.gov/whd/regs/compliance/whdfs23.pdf.
[2] “Overtime for White Collar Workers: Overview and Summary of Final Rule”, U.S. Department of Labor, https://www.dol.gov/sites/default/files/overtime-overview.pdf.