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New Overtime Rule to Affect NC’s Small Firms and Nonprofits

Sentinel is cautioning clients about some big changes that are in store, particularly for small businesses and nonprofits across North Carolina, as a new federal rule will require overtime pay to 156,000 salaried workers who are currently ineligible.

When the U.S. Department of Labor’s (DOL) so-called “white collar exemption” rule goes into effect December 1, employers will be required to pay overtime to most full-time employees earning less than $47,476. That’s quite a jump from the current salary threshold of $23,660.

Employers will have little choice but to raise employee salaries or cut workloads. The final rule also raises the salary requirements for highly compensated employees from $100,000 per year to $134,004 per year. Still, the businesses most affected will be small firms and nonprofits.

The new salary threshold is the biggest change brought by the new rule, but meeting the threshold alone does not mean an employee isn’t entitled to overtime pay. In fact, there are five category exemptions included in the rule: executive, administrative, outside sales, professional, and computer professional.

For an “executive” class employee to be exempt from overtime, they must earn the salary threshold, spent most of their day managing people or projects, must regularly direct the work of two full-time employees and have authority over employment changes (i.e. hiring and firing) at the organization.

It’s fair to say that there will be significant challenges mounted against this federal rule, but employment law experts say those challenges will not gain traction in time to prevent a December 1 effective date. North Carolina is among the top 10 states impacted by the DOL’s rule.

There is one caveat of note relative to the salary threshold. The DOL will permit employers to use nondiscretionary bonuses, commissions, and incentive pay to satisfy up to 10 percent of the salary threshold.