The federal overtime rule sets overtime pay requirements for covered workers. Its purpose is to ensure that workers are fairly compensated for their work and to prevent employers from exploiting employees by requiring them to work long hours without proper compensation. The threshold amount for overtime eligibility changes periodically to account for inflation and economic changes. Small business owners should be aware of these changes and consult with a highly skilled business attorney to ensure they remain in compliance with the law. Keep reading for a brief overview of overtime rule changes since 2016.
Do you own a small business? Skeeters, Bennett, Wilson & Humphrey want to ensure you are prepared for upcoming Federal Overtime Rule changes. Our knowledgeable and experienced Central Kentucky business lawyers can help you understand current and proposed overtime rules, assess your obligations, and implement policies to prevent violations and disputes. If you have any questions, don’t hesitate to contact us.
The U.S. Department of Labor is expected to propose a new overtime rule with higher salary thresholds for white-collar exemptions, making more people eligible for overtime pay. The proposed rule was initially announced in spring of 2022 and is anticipated to be released in May 2023, according to the most recent regulatory agenda.
In September 2020, the U.S. Department of Labor announced an update on the overtime rule, which remains in effect. This update made 1.3 million previously ineligible workers eligible for overtime. The new rules increased the minimum salary requirement for administrative, professional, and executive exemptions from $455 to $684 per week, or $35,568 per year, on January 1, 2020. Additionally, employers are now allowed to include non-discretionary bonuses, commissions, and incentive payments to satisfy up to 10 percent of the salary requirement, as long as the employer pays them annually at the minimum.
Changes to Federal Overtime Rules were announced in May 2016 and went into effect on December 1, 2016. The rule raised the pay threshold for overtime protections from $455 to $913 per week. However, on August 31, 2017, a federal district court in Texas ruled that the Department of Labor exceeded its authority in raising the salary threshold, invalidating the rule. As a result, the salary threshold for overtime protections remains at $455 per week. Small business owners should consult with legal counsel for the latest information on overtime regulations under the Fair Labor Standards Act.
Recent changes to Federal Overtime Rules are taking small business owners by surprise and will force many to change their payroll operations. Announced on May 18, 2016, the rule change will go into effect on December 1, 2016, and expand overtime protections to an estimated 4.2 million workers.
The new rule changes overtime regulations under the Fair Labor Standards Act’s minimum wage and overtime production. Before the rule, employees were excluded if they were salaried, earned at least $455 per week, or were in positions considered executive, administrative, or professional. The pay threshold for overtime protections will now be raised to $913 per week. For small business owners, employees who do not make at least the threshold salary and are classified as exempt are entitled to time-and-a-half pay after working 40 hours a week.
To avoid paying the time-and-a-half, the most obvious choice for small business owners is to limit employee hours to 40 and under. The other option would be to raise employees’ salaries beyond the new threshold, in which case employees would no longer qualify for overtime protections.