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Exempt Vs Nonexempt And Overtime Pay

Posted by Leslie Ruhland on Apr 27, 2017 10:52:04 PM
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What appears to many employers as a simple way to determine who gets overtime pay can actually be quite complex. Determining employee classification correctly is critical.


Overtime pay compliance is a tricky issue for employers that is fraught with legal dangers. Add to this ongoing conflict between current and past federal administrations over the DOL's "Final Rule" and the prospect for clarity is not encouraging.

The uncertainty and potential for employee lawsuits means that many employers have already opted to make the necessary changes to comply with the proposed new rules even though it is not legally required for now. 

And recent threats of lawsuits against the new administration over the DOL's Final Rule has many employers waiting to see how the legal fight plays out over the course of this year before committing to costly changes.

Employee Classification: The Key for Overtime Pay Consideration

The federal and California rules for overtime pay and related issues is complex and, at times, even vague. This infographic represents some of the most common occupations in California that are typically considered exempt from required overtime pay.


The Current Status of Overtime Rule Changes

The DOL, under former President Obama, issued a final rule revising the FLSA overtime regulations in May 2016. On November 22, a federal district court judge in Texas placed a temporary injunction, effective nationwide, on the revised rule, preventing it from taking effect on December 1, 2016 as originally slated.

This means that the rule's implementation and enforcement are on hold. The induction has been appealed to the 5th Circuit Court of Appeals, and on February 22, 2017, the DOL moved for an additional 60-day extension to file its brief, citing the absence of a confirmed Labor secretary. That extension will end on May 1 and the confirmation of Labor Secretary nominee Acosta has yet to be determined.

The Final Rule, if eventually allowed, will accomplish the following:

  • The annual salary threshold for exempt positions will more than double from $23,660 to $47,476.

  • Employers will be allowed to use nondiscretionary bonuses to satisfy up to 10 percent of the general salary threshold, provided the incentives are made on a quarterly or more frequent basis.

  • There will be no change in the general duties test used to determine whether employees earning more than the salary threshold must be classified as nonexempt from overtime, including the exemptions for executive, administrative and professional positions, among others.

  • For highly compensated employees (HCEs), who may be classified as exempt if they meet the criteria of a less-stringent duties test, the final rule will raise the annual HCE salary threshold from $100,000 to $134,004.

In the meantime, it is quite likely that this version of the overtime regulations will not be realized, but that another, less radical increase will take place.

For now, most employers have chosen to take a "wait and see" approach and continue to comply with the existing rules.

Stay Informed of Overtime Labor Laws

Changes in regulations expand the potential of risk for employers, require new workplace postings, or mandate updates to existing workplace policies. We recommend that all employers consult with experienced employment counsel to ensure compliance.

Accurate and timely management and compliance practices are required for every business and every payroll professional. But there are options.

Accuchex, a reputable payroll management services provider, can not only relieve you of the burden of your ongoing payroll process demands, but can potentially prove to be a more cost-effective solution, as well.

Click this link o get your free download of our Payroll Outsourcing Guide. Or click the button below to learn what you need to know about labor law in California. For more information, feel free to call Accuchex Payroll Management Services at 877-422-2824.

Free Download: Payroll Outsourcing Guide

Topics: california labor law, overtime pay, employee classification, employee lawsuits, DOL, fsla, exempt employees

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