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New Rules for Overtime Pay

The Fair Labor Standards Act (FLSA) requires that the vast majority of employers pay time-and-a-half to employees who work more than 40 hours per week. This overtime pay requirement applies to most employees; only employees who meet certain tests are exempt from this obligation.

The most common exemption is for employees who (a) are executive, professional or administrative employees, (b) are paid on a salary basis, AND (b) make at least $23,600 per year. But the FLSA rules will change effective December 31, 2016, and the new pay threshold will be double the old minimum: $47,476 per year. The Department of Labor estimates that this new rule will impact 4.2 million workers, at employers both large and small.Some jobs are specifically excluded in the statute itself, such as employees of movie theaters and many agricultural workers. Also excluded are jobs which are governed by some other specific federal labor law, such as railway workers (who are subject to the Railway Labor Act) or truck drivers (who are covered by the Motor Carriers Act.)The major exception to the overtime pay requirement, though, is three-pronged test mentioned above. The last two elements – paid a salary, and minimum salary level – are easy to establish. The “job duties test,” though, is more difficult to define and classify. In brief, “executive” duties are those which involve management and supervision of other employees, including the authority to hire and fire, establish pay rates, plan and direct the work. “Professional” duties include the “learned professions,” such as a lawyer or doctor, as well as dentists, clergy, licensed engineers, teachers and registered nurses. “Administrative” duties are those of high-level employees who have broad managerial authority and who “keep the business running.” If you are an employer who does not pay overtime, it is important to analyze the duties and the pay of your employees to confirm that they meet the new Department of Labor criteria for exempt employees. Employers should not try to exaggerate or mischaracterize an employee’s duties to avoid paying overtime; the penalties for failing to comply with the law can be crushing. For assistance in evaluating your employees, contact one of the business attorneys at Creighton McLean & Shea PLC