Department of Labor Announces New Overtime Rule

The U.S. Department of Labor recently released its final overtime rule, which will make an estimated 4.2 million additional workers eligible to receive overtime pay. Effective December 1, the rule increases the exemption threshold from $23,660 to $47, 476, essentially doubling the threshold for executive, administrative and professional employees.

The new overtime rule comes from the Obama administration’s initiative to lift middle-class wages. However, many small businesses cannot afford the increase in personnel expenses. Proposed solutions include limiting time to 40 hours, cutting base pay to offset costs or cutting benefits to full-time employees.

As part of the new rule, the following details are included:

• The salary threshold will be increased to $47,476 annually ($913/week) - an increase of slightly more than 100 percent from the current threshold of $23,660 annually ($455/week). The proposed level was $50,440 annually ($970/week).
• There will be no changes to the duties test.
• The salary threshold will be updated every three years and tied to the 40th percentile of full-time salaried workers in the lowest wage region of the country (currently the Southeast).
• Employers will have until Dec. 1, 2016, to come into compliance with the new requirement--close to 200 days. The proposal did not include an implementation period, but there were suggestions that it could be as short as 60 days.
• The rule allows employers to apply bonuses and incentive payments to up to 10 percent of the new salary threshold.

In August, the Ohio AgriBusiness Association submitted comments to the DOL opposing the proposed rule, voicing concerns on the impact the new rule would have on small agribusinesses. To read the full letter from OABA President and CEO Chris Henney, click here.

OABA will continue to work with our national association partners to determine next steps and determine solutions for our member companies.