Overtime laws & compensation compliance analysis

Overtime: What you need to know

The Fair Labor Standards Act (FLSA), also known as the federal Wage and Hour Law, requires enterprises engaged in interstate or foreign commerce and state and local governments to pay overtime of 11/2 times an employee's regular rate of pay for hours worked in excess of 40 hours in a workweek. The FLSA does not require that overtime be paid for hours worked in excess of 8 hours per day or on weekends or holidays. However, states are permitted to provide workers greater overtime protections than those offered by the FLSA.
U.S. Department of Labor’s (DOL) proposed overtime rule. The DOL’s proposed overtime rule increases the current minimum salary threshold for overtime exemption. Under the proposed rule, employees would have to earn at least $679 per week ($35,308 per year) in order to be exempt from overtime pay for any hours worked over 40 in a workweek. This is an increase from the current $455-per-week threshold ($23,660 per year). The proposed rule also increases the total annual compensation requirement for “highly compensated employees” (HCEs) from the currently enforced level of $100,000 to $147,414 per year. The DOL’s proposed rule makes no changes to the duties tests required to determine overtime eligibility. Under the proposed rule, employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level. Unlike the Obama-era rule, this proposed rule does not incorporate automatic updates. The proposed rule instead requests comment on a plan to review the salary level every 4 years, but the DOL may face opposition to this review proposal.
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