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New overtime laws activate December 1

JACKSON, MISS– New regulations will go into effect under the Fair Labor Standards Act on December 1, and it will impact how Mississippians are paid. 

On May 18, 2016, President Barack Obama and United States Secretary of Labor Thomas Perez announced the update of the Department of Labor’s overtime regulations. The new rule will extend overtime for over 4 million workers within a year of the December 1 start date.

“Our laws currently say for an employer,” said Joel Jasper, attorney with Morgan White Group. “basically every employee gets paid by the hour. Unless that employee meets certain things that exempt them from the overtime rule.”

Jasper said many employees are currently salaried and are not paid overtime.

“(They’re) making, say, $40,000 a year,” said Jasper. “Now, their employer will have to raise their pay to $47,500, or they’re going to have to turn around and figure out how they’re going to pay them overtime and start tracking those hours.”

These overtime laws, Jasper said, essentially raise the minimum pay for those making under $47,500. It also provides protection from being overused at work.

“It’s going to keep people from being worked like a dog,” said Jasper. “It will curtail working 60 or 70 hours a week for $35,000.”

This new regulation under the Fair Labor Standards Act:

  1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
  2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the new regulation amends the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The effective date of the final rule is December 1, 2016. The initial increases to the standard salary level from $455 per week (roughly $23,660 annually) to $913 per week ($47, 476 annually). Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

 

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