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New overtime rule expanding overtime eligibility

The Fair Labor Standards Act (“FLSA”), sets regulations concerning minimum wage and overtime pay and contains an exemption to overtime pay for certain executive, administrative and professional employees. A Final Rule, effective December 1, 2016, increases the FLSA salary threshold from $455 a week ($23,660 for a full-year worker) to $913 a week ($47,746 for a full-year worker). Therefore, as of December 1, 2016, salaried employees who make less than $913 a week or $47,746 annually will now qualify for overtime pay. It is important to note that the new rule does NOT:

  • change the duties test for determining whether an employee’s duties meet the requirements to be considered a salaried employee;

  • require newly-eligible workers to be converted from salaried to hourly pay status;

  • change the rules on the small-agency exemption or compensation time; or

  • require salaried employees below the threshold to use time-clocks.

While the new rule only changes the salary threshold under the FLSA, there will still be a lot of work to prepare for the December 2016 change. Some of the options to comply with the new rule are:

  • raise affected position salaries to above the threshold;

  • evaluate and realign employee workloads to reduce the need for overtime;

  • budget to pay salaried employees overtime or comp time when they work overtime; and/or

  • change salaried employees to hourly for easier overtime oversight.

It is recommended that each municipality work closely with an attorney to identify which salaried positions within the City are below the new salary threshold and then analyze those positions to determine which option is best for that position. This analysis will be important as different options will be better for some affected positions than others.

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