The federal Fair Labor Standards Act (FLSA) requires that all workers (with some exceptions) receive at least a minimum wage for every hour they work, as well as overtime pay at one and a half times their regular rate of pay for hours they work beyond 40 in a workweek. This applies to both hourly and salaried workers.
Please note: It is a common misconception that employees who are paid on a salary basis are exempt from overtime; this is not true. Employees paid a salary must be paid a certain minimum amount and must have job duties that meet specific criteria to be exempt from overtime.
There are some exceptions to the minimum wage and overtime requirements for certain employees, if their jobs meet specific criteria. There are 5 categories of employees who do not have to be paid overtime: executive, administrative, professional, outside sales and certain computer-related occupations. These are known as the “white collar” exemptions because employees must be paid a certain salary amount and have specific job duties to qualify, like management of other employees or specialized skills that require advance schooling.
To qualify for one of these exemptions (and thus not receive overtime pay), employees must meet certain tests regarding their job duties and be paid a certain minimum salary. (One side note: the outside sales exemption does not require a minimum salary amount, so those employees are not affected by this change.)
Currently, the minimum salary amount to qualify for an overtime exemption is $23,660. Starting December1, 2016, the minimum salary to qualify for an overtime exemption will increase to $47,476. This means that salaried employees whose salary is less than $47,476 a year (or $913 a week) cannot be exempt regardless of their job duties and must be paid overtime for all hours over 40 they work in a given workweek.
To prevent the salary level from becoming “outdated,” it will be updated automatically every 3 years. The first update will take place on January 1, 2020, with future updates occurring every 3 years after.
This change will entitle many workers making more than the current threshold of $23,660 to overtime pay and will be a big change for small businesses.
If you have any questions about how this change will affect your business, please call our offices at 844-242-LSBA (5722) and ask for Lance or Erin.
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