New federal rules expanding overtime to apply to more employees go into effect Dec. 1 and the V.I. Department of Labor wants to remind V.I. employers they apply in the territory.
Overtime protections were first put into place by the Fair Labor Standards Act of 1938 and established the standard that workers be paid time-and-a-half for any hours worked over 40 hours in a week.
In general, all hourly employees are guaranteed overtime, and salaried employees are presumed to have the same guarantee unless they both make more than a salary threshold set by the Department of Labor, as well as pass a test demonstrating they primarily perform executive, administrative or professional duties.
A limited number of occupations are not eligible for overtime pay, including teachers, doctors and lawyers, or are subject to special provisions.
In March 2014, President Barack Obama signed a memorandum directing the U.S. Department of Labor to update the overtime rules, which have been comprehensively updated only once since the 1970s.
The final rule will raise the salary thresholds and increase Americans’ wages by an estimated $12 billion over the next 10 years, with an average increase of $1.2 billion annually.
But employers retain flexibility in how they comply with the new rule, such as increasing salaries to at least the new thresholds to keep positions that are primarily executive, administrative or professional exempt from overtime pay; paying overtime for hours worked in excess of 40 in a week; or reducing overtime hours.
Under the new rules, the salary threshold will be updated every three years. Based on projections of wage growth, the threshold is expected to rise to more than $51,000 with the first update in 2020.
They also raise the “highly compensated employee” threshold, from $100,000 to $134,004, above which only a minimal showing is needed to demonstrate an employee is not eligible for overtime. This upper threshold was designed to ease the burden on employers in identifying overtime eligible employees since it is more likely that workers earning above this high salary level perform the types of job duties that would exempt them from overtime requirements.
The U.S. Labor Department responded to employers’ concerns by making no changes to the “duties test” and allowing bonuses and incentive payments to count toward up to 10 percent of the new salary level.
Workers earning more than the salary threshold are still subject to the duties test to determine eligibility for overtime. Also for the first time, employers will be able to count bonuses and commissions toward as much as 10 percent of the salary threshold.
For more information regarding the Final Rule on Overtime, please contact Gwen Steele, Labor relations specialist at 340-773-1994 ext. 2124 or visit www.vidol.gov or www.dol.gov/whd/overtime/final2016/.