The US Department of Labor has released updated regulations relating to overtime pay for more than 4 million American workers. The new federal overtime rules modify eligibility as well as the income threshold for qualification. Under the new overtime guidelines, almost all workers who earn less than $913 per week or $47,476 annually will automatically qualify for overtime pay whenever they work more than 40 hours per week. The new regulations apply to all workers beneath the $47,476 threshold, regardless of the work they perform within your organization, with few exceptions applying to some teachers, colleges and universities (secondary education employers), doctors and contract lawyers.
This is a significant change to overtime rules in the past, which allowed an employer to exempt many workers who fell into one of three classifications:
- admin to an executive or owner
- management or executive position
- professional workers
The so-called “duty test” allowed many employers to provide job titles or job descriptions that made it seem as if workers who would otherwise qualify for overtime were performing executive level work or professional services. The new federal overtime rules modify eligibility to include all employees, removing the ability to exempt some employees based upon the duty test with few exceptions (such as secondary education employers, teachers, doctors and lawyers). The “white collar exemption” still exists for employees with higher compensation packages, but they must meet the $47,476 annual salary minimum without opportunity for earnings reduction as part of a three-prong test.
This leaves San Diego employers with three basic options to avoid unpaid overtime allegations and litigation:
- Raise the pay of an employee to exceed the $47,476 annual threshold
- Pay overtime at the rate of time and one-half for those who exceed 40 hours of work in a week
- Tightly manage policies, procedures and internal controls to ensure workers cannot and do not exceed 40 hours of work each week
The “lawyers for employers” at the Watkins Firm are committed to advising and supporting our business clients through these rapidly changing times. The best news for employers is that the new regulations will not take effect until December 1 of this year. If you have questions about the new regulations, or require assistance bringing internal employment documentation and policies and procedures manuals into compliance we invite you to call 858-535-1511 for a free and substantive consultation.