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Highlights, Traps and Silver Linings


New overtime regulations and how to prepare


By Stuart Jackson and John Davis Guest Writers


On May 18, 2016, the Department


of Labor published the final rule updat- ing the overtime regulations under the Fair Labor Standards Act, which requires payment of a minimum wage and overtime for hours worked over forty (40) in a week unless a specific exemp- tion applies. The Department of Labor estimates that over 50,000 employees in the state of Arkansas alone will be impacted by the changes to the over- time regulations. Here is our take on the changes made, the traps to avoid, a silver lining and how to prepare.


KEY PROVISIONS OF THE NEW OVERTIME REGULATIONS The main thing we’ve all been wait-


ing for is the new salary level for the administrative, professional, executive and computer employee exemptions.1 The new regulations set the level at $913 a week, or $47,476 per year. That is a significant increase of $458 per week, and that is the new “reality” for employers that will take effect on December 1, 2016. Other changes include


1. The salary levels will be adjusted every three years (instead of every year as originally proposed) begin- ning in 2020.


THOUSANDS OF PREVIOUSLY SALARIED-EXEMPT


EMPLOYEES IN ARKANSAS WILL SEE THEIR POSITIONS TURNED INTO OVERTIME-ELIGIBLE POSITIONS, SO MAKING THE CHANGE NOW GIVES YOU SOME COVER.


2. The “highly compensated employee” exemption level jumps from $100,000 per year to $134,004 per year.


3. The Department of Labor’s new overtime rule does allow the inclu- sion of bonuses when determining an employee’s total pay for purposes of the administrative, professional and executive exemptions. Non- discretionary bonuses, incentive pay- ments (possibly tied to productivity or profitability) and commissions paid on a quarterly or more frequent basis can account for up to 10 per- cent of the required salary level. Employers are also allowed to make a “catch-up” payment in any given quarter to ensure an employee’s salary level in fact reaches the new minimum level. There are no changes being made to


the Motor Carrier Exemption. However, the Motor Carrier Exemption only applies to the payment of overtime. You still must pay an employee a minimum hourly wage ($8 an hour in Arkansas)


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for all time worked. Paying a driver the minimum wage just for driving time is not going to be enough given the other things drivers do.


TRAPS TO AVOID WHEN MAKING THE TRANSITION AND A SILVER LINING One of the main questions we’ve


received is this—can an employer get around the new overtime rules by treat- ing employees as independent contrac- tors? The answer is an emphatic “no,” unless you want to get in trouble with various government agencies, including the Department of Labor (which has a multi-factor test to determine if a per- son is an employee or an independent contractor) and the Internal Revenue Service. Another potential “trap” we see –


trying to limit your new, non-exempt employees to just forty hours of work per week. Chances are your previously exempt employees were working more than forty hours per week. Following the transition in December, your newly non-exempt employees may be tempted


Issue 3 2016 | ARKANSAS TRUCKING REPORT


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