3501 Tully Road Suite B • Modesto CA 95356
(209) 526-3091 • (209) 526-2287

23 Jun

New Overtime Ruling

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Back in 2014, President Obama directed the Secretary of Labor to update the overtime regulations to better reflect the Fair Labor Standards Act. This update should also simplify and modernize the rules so they’re easier to follow and understand. Recently, the Department of Labor issued its final rule that will potentially put more money in the pockets of middle class workers.

Exempt vs. nonexempt status

Exempt and nonexempt status refers to an employee’s eligibility for overtime pay and certain other legal rights. This status is determined on applicable law as well as the nature of the employee’s work, duties and responsibilities.

Nonexempt employees are typically paid by the hour for each hour they work in a pay period and receive overtime pay in accordance with applicable overtime rules.

Exempt employees are generally paid a salary (fixed amount) intended to compensate fully for all hours worked each week, are not compensated based on the number of hours worked, and do not receive overtime pay.

While most exempt employees are required to receive a salary, not all salaried workers are necessarily exempt. To qualify as salaried exempt, the employee must meet the “duties” test as well.

THE NEW RULING
The complete ruling is not yet available, but the key aspects of the update include:

- Federal exempt salary threshold is raised to $47,476 from $23,660*
- Salary threshold will update every 3 years, beginning January 2020
- The new rules go into effect December 1, 2016

* Exempt employees in California must generally earn a minimum salary of no less than two times the state minimum wage for full-time employment. This amounts to $41,600 for 2016. There are, however, different exemption rates for different classifications as well to consider.

  1. WHAT DOES THIS MEAN FOR ME?

You can watch the Department of Labor's video explaining the new rule here.

Under the new rules, those who earn salaries of less than $47,476 a year will automatically qualify for overtime pay of time-and-a-half if they work more than 40 hours a week. The duties of people who earn $47,476 to $134,004 will determine if they are exempt from overtime.

Employers will have to choose to either cut employee hours to no more than 40 hours (8 hours per day) or increase the salaries of workers to comply with the new ruling.

  1. Contact us if you have any questions regarding the new overtime ruling.

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Clendenin Bird & Company, PC
3501 Tully Road Suite B • Modesto CA 95356
(209) 526-3091 • (209) 526-2287