The Department of Labor's recent changes to the Fair Labor Standards Act (FLSA) overtime regulations will greatly increase the number of workers who are eligible to receive overtime pay. You should take care to understand these new rules as well as any local, more stringent requirements to achieve compliance in different states.
Under FLSA rules, employers must give nonexempt employees overtime compensation (1.5 times their regular rate of pay) for each hour they work over 40 in a workweek. While most employees are generally considered eligible for overtime, the FLSA provides for some exceptions that permit employers to classify employees as "exempt" from federal minimum wage and overtime requirements.
The former FLSA rules specified that employees who earned a salary of more than $23,660 a year ($455 a week) could be exempt from earning overtime pay, but the recent update increased this threshold to a salary of $47,476 a year for employees who are exempt under the executive, administrative or professional rules. According to the White House, this change is projected to make an additional 4.2 million employees eligible for overtime pay.
Compliance in Different States
State governments can set their own overtime laws, as well. The FLSA establishes a minimum standard, but each state has the power to set stricter overtime rules.
For example, the State of California Department of Industrial Relations asserts that employers in the state are required to provide their employees with overtime compensation when they work more than eight hours in a single workday. Colorado requires employers to pay overtime for any workday in which an employee works more than twelve hours, when an employee works for more than 12 hours consecutively, or when an employee works more than 40 hours in a week, depending on which amount is greater.
If a state in which you conduct business has stricter overtime rules than those established by the FLSA, you need to ensure that you are compliant with both the federal and state standards for each of the states in which your business operates. Even if you just have one employee in California, you need to have a solid understanding of the California overtime laws, as they will apply to that specific employee.
Adjusting to the New Standards
There's a high likelihood that your business will need to make some overtime adjustments to comply with the updated overtime regulations. Though this can be a seemingly overwhelming process, you can arm yourself to take on the challenge by ensuring that you're up-to-date on all of the applicable federal and state laws.
* A U.S. District Court has temporarily blocked the new overtime rules from going into effect on December 1, 2016. Read the Eye on Washington to learn more.