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Overtime Law Update

Partners - HallwayBy Hoffman & Associates

In  June, we warned business clients that new regulations governing overtime laws would take effect on December 1, 2016. However, a number of states sued the Department of Labor and on November 23, the United States District Court for the Eastern District of Texas issued an injunction blocking the implementation from taking effect.

What does this mean? Well, no one really knows. The Department of Labor can appeal the decision, but until that potential appeal is ruled on, we are in a state of limbo – especially with a new presidential administration taking office on January 20, 2017. President-Elect Trump’s Secretary of Labor may have the final say in whether to fight for the new regulations.

Still, employers need to be prepared. If the Department of Labor wins its appeal and the law does go into effect, it is possible that the rule will retroactively go into effect starting December 1, 2015 when it was first set to take effect.

The rule, if it is ever enacted, will cause approximately 4.2 million currently exempt workers to have a right to time and a half pay from their employers.

The current law exempts anyone making more than $455 a week from being eligible for overtime, but that number would rise 100 percent to $913 a week. What this means for employers is that if the rule is enacted, they will have to pay overtime to many employees who make up to $47,476 annually while currently any employee making over $23,660 annually is exempt from overtime.

Only executive, administrative, professional, computer and outside sales employees (based on their job duties, which makes up the “duties test”) making $47,476 or more will be exempt from being paid overtime if the rule is enacted. Each of the exempt job categories requires a number of factors to be met to qualify for the exemption.

Another change in the overtime regulations raises the threshold for “highly compensated employees.” Under the previous law, any employee making more than $100,000 annually would be exempt from being paid overtime without delving fully into the duties test. If the rule is enacted, a highly compensated employee will not be exempt without regard to the duties test until he or she makes $134,004 annually.

The new rule also has a mechanism that will recalculate the income levels based on the 40th percentile of earnings of full-time salaried workers in the lowest Census Region (currently the South) every three years beginning on January 1, 2020.

For more information regarding this topic or any other business or tax planning related topic please visit our website at www.hoffmanestatelaw.com or contact us at 404-255-7400.  You can also email us at info@hoffmanestatelaw.com.