Silicon Valley Business Law Firm Explains new Proposed Overtime Rules

In a large corporation, it is often easy to distinguish why top tier talent receives a salary, while office staff and other low-level workers work on an hourly basis. But in the middle, where technical staff often work long hours and rely on creativity and independence to accomplish their work, it can be much more challenging to determine whether an employee should be considered hourly or salaried. There are two main tests, one based on a minimum income level and the other based on an assessment of duties; this blog post concerns proposed changes to the minimum income level, as there are no proposed changes to the duties test. Another complexity to this issue is the fact that the proposed minimum amount has bounced up and down between the Obama and Trump administrations. Because this is an ever-changing landscape with real financial implications for Silicon Valley businesses, SAC Attorneys LLP have written the following blog post to provide an overview.

If you are dealing with employee compensation issues, you should attain expert legal counsel to lead you through the process successfully. The attorneys at SAC Attorneys LLP are positioned to provide you with that counsel—call us for your free consultation today at (408) 436-0789.

Under the Fair Labor Standards Act, a person paid a salary is not overtime eligible. To be paid a salary, he or she must make at least $23,660 per year or $455 per week. Regardless of political inclination, almost everyone can agree that that is a meager pay rate for salaried work and an overtime exemption. That rate was set 15 years ago with no intervening increases. In the intervening years, the Obama administration proposed raising it to $47,000, but that proposal never became a rule. This rule is frequently an issue because it allows employers to designate low paid employees as overtime-exempt, work them well beyond 40 hours per week, and prevent them from receiving overtime pay.

The Trump administration has proposed raising the overtime threshold to $35,308 or $679 per week. This is not a final rule, as it is up for comment during a 60 day comment period. If no changes occur after the 60 day comment period concludes, it could become law as soon as January 2020. Again, there is no proposed change to the Fair Labor Standards Act’s “duties test.”

There are other changes also in the works regarding employees at the top levels of compensation. Specifically, the standard for “highly compensated” employees is proposed to move from $100,000 per year to $147,000. This definition involves who is allowed to join specific employee retirement plans, 401(k)’s, and 403(b)’s and what companies can contribute to those plans as opposed to plans held by lower paid employees.

In both the minimum salary threshold for salaried employees and the thresholds for highly compensated employees, employers will be able to use bonuses and incentive payments for up to 10% of the threshold pay.

You will need expert human resources and business counsel to adapt to the changing employee compensation rules, along with the bevy of other rules promulgated every day. If you are managing a business, don’t create extra headaches, attain expert legal advice. For a free initial consultation, contact SAC Attorneys LLP today at (408) 436-0789. Based in San Jose, California, our firm is prepared to represent clients in Mountain View, Los Gatos, Cupertino, Fremont, Palo Alto, Santa Clara County, Silicon Valley, and around the world.