New Federal Overtime Rules: Understanding the Change and Successful Compliance
On May 18, 2016, the United States Department of Labor (DOL) announced new federal rules governing overtime. The new regulations will have a significant impact on the number of individuals receiving overtime pay. Going into effect on December 1, 2016, the changes set forth will extend overtime pay protections to an additional four million American workers, almost 200,000 of whom reside in Illinois1.
An employee making $47,476 per year or less will be entitled to overtime pay beginning December 1, 2016.
These changes affect the overtime rules in four particular areas:
- Salary threshold;
- Automatic updates;
- Bonuses/incentives/commissions; and
- The "duties test."
The impact of the new rule on the health care industry is expected to be substantial, and ISMS has developed this Issue Brief to help physicians prepare their practices.
Overtime Protections Expanded
The most significant change to the overtime rules is to the salary threshold. The threshold will be raised from $455 per week to $913 per week, more than doubling the salary at which an employer must automatically pay employees overtime. This means that an employee making $47,476 per year or less will be entitled to overtime pay beginning December 1, 2016. The DOL determined this wage threshold by finding the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region, which is currently the South (composed of 17 states). In addition, the salary level for highly compensated employees (HCE) was updated, increasing to the 90th percentile of full-time white-collar employees nationally. As a result, a full-time salaried white-collar employee would now have to be paid $134,004 per year instead of $100,000 per year in order to be automatically exempt from overtime pay.
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