1.
The New Overtime Regulations
How They Impact Your Business & Options to Avoid Increased Labor Costs
May 20, 2016
This week federal overtime regulations were overhauled. The result: starting December 1, 2016, to be
exempt from overtime, employees must earn at least $47,476 per year.
In sum, all employees currently classified as “exempt” (not entitled to overtime), and paid a salary
between $23,660 and $47,475, are now entitled to overtime. That’s right. Let that sink in a bit. Those
analysts who pound out 60 hours a week at $45,000 a year—under the new rules they are entitled to
overtime. So, 20 of those 60 hours would be paid at time and a half, making their annual compensation
$77,451.92.
If that didn’t take your breath away, rest‐assured employees will be well‐versed in their right to be paid
more thanks to the media. The bury‐your‐head‐like‐a‐flamingo act won’t work this time. Avoiding this
new requirement will be an invitation for the U.S. Department of Labor to pay you a visit – not for a cup
of tea, but for an audit and investigation, or worse—you could be inviting a lawsuit.
Here is an overview of the new regulations:
 Sets the minimum salary level for FLSA White Collar Exemptions (Executive, Administrative, and
Professional) at $913 per week ($47,476 annualized) – up from the current $455 per week
($23,660 annualized)
 Raises Highly Compensated Exemption to $134,004. This was raised from $100,000.
 Creates a mechanism for updating salary and compensation levels every three years to ensure
that the regulations are staying up with economic realities.
 Updates the salary basis test, so that nondiscretionary bonuses and incentive payments (including
commissions) can satisfy up to 10% of the new salary level.
 Applies specific new rules apply to Non‐Profits and Higher Education
What do I do now?
Between now and December 1, 2016, employers should be planning for this change. Right now you
should:
1. Review all of your employees who are classified as exempt, and determine the basis of the
exemption.
2. For all employees who are currently classified as exempt and earn a salary between $23,660 and
$47,476, flag them. You will need to make changes with respect to how you pay these employees.

2.
3. Establish a time‐keeping system so that by December 1, 2016, you are tracking the hours all of
your employees, who are earning less than $48,000. Okay, the real threshold is $47,476, but let’s
be safe.
4. Don’t panic.
Here are some options to help contain labor costs:
 Convert salaried exempt employees currently earning $23,660‐$47,476 to hourly employees.
Create a policy that does not permit overtime unless pre‐approved by management.
 If limiting work to hours to 40 a week is impossible, instead of creating an hourly wage that
corresponds to their current salary, you can trim the hourly rate, and plan for an allotted amount
of overtime.
 Convert salaried employees to hourly, and hire more of them, and enforce a strict no overtime
policy.
 Raise salaries, so that they are above the threshold to receive overtime. This may make sense for
employees currently earning a salary of $40,000 ‐ $47,476.
These are big changes, and with planning and some guidance, you can manage them. Get on top of it
now, and create a plan that works for your business.
My partners and I can help structure a plan that navigates the new requirements and saves you money!
Jessica Brown Wilson, Partner