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News & Knowledge

USA: Final overtime rules released – What’s next for employers?

1st June 2016
Tom Peak, Taylor Porter (USA)

The U.S. Department of Labour issued the final version of overtime regulations and rules which will take effect on 1 December 2016. This article by Tom Peak of MSI's Louisana law member Taylor Porter explains the new regulations.

The U.S. Department of Labor issued the final version of a much-anticipated overtime exemption rule, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act’s “white collar” exemption to $47,476 per year. The final rule will broaden federal overtime pay regulations to include more than 4 million more people.

Now what?

Many of our clients have been “waiting for the other shoe to drop” with respect to the proposed revisions to the “white collar” exemptions to the overtime requirements under the Fair Labor Standards Act, since the proposed (revised) rules were announced in June of 2015, and since the comment period ended last September. Well, it has dropped, and after receiving some 300,000 comments, there was good news and bad news for employers in the final rules, which will be effective Dec. 1, 2016.

The good (or, more accurately, “less bad”) news is that the new minimum salary requirement (to qualify for the exemptions) was lowered from $50,440 ($970/week) under the initial proposal to $47,476 ($913/week) under the final rules. Additionally, the minimum salary level will be subject to adjustment every 3 years, rather than annually, as initially proposed, qualifying non-discretionary bonuses and/or incentive payments (such as commissions) may be used to satisfy 10% of the minimum salary requirement,  and there were no changes to the duties test, as was initially possible and feared.

The bad news is that, effective Dec. 1, 2016, many employees who are presently exempt and earning between $23,660 and $47,475 as annual salaries, will no longer be exempt, entitling them to overtime pay for hours worked in excess of 40 hours in a workweek and requiring employers to review/revise job classifications and compensation levels and/or implement pay plans in order to mitigate the impact on their bottom line and comply with the law.

Click here to view a chart showing differences between current regulations and the final rule

About the author
Practicing employment law for more than 30 years, Tom Peak is a Partner at Taylor Porter in Baton Rouge, and he is admitted to practice before all Louisiana state courts and agencies, the U.S. District Courts for the Middle, Eastern, and Western Districts of Louisiana, and the U.S. Fifth Circuit Court of Appeals. Mr. Peak has handled numerous matters before the Equal Employment Opportunity Commission, National Labor Relations Board, United States Department of Labor, OSHA, Wage Hour Division of the U.S. Department of Labor and U.S. Department of Agriculture, the Louisiana Civil Service Commission, and Louisiana Workforce Commission. View the full bio

About Taylor Porter - Baton Rouge

Founded in 1912 in the heart of Louisiana’s economic development in Baton Rouge, Taylor Porter is one of the oldest, largest and most respected law firms in Louisiana, with a diverse range of local, regional, national and international clients in the most complex transactions and litigation across a variety of industries.

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