Under the OBBBA, “qualified overtime compensation” means overtime compensation (excluding qualified tips) paid to an individual that: • Is required by federal law — specifically, under section 7 of the Fair Labor Standards Act (FLSA); and • Exceeds the individual’s “regular rate” as determined by the FLSA. IS “NO TAX ON OVERTIME” A MISNOMER? Sort of. There are plenty of misconceptions floating around related to the OBBBA’s “No Tax on Overtime” provisions. The main one is that all overtime pay provided to any employee is subject to the deduction. As just referenced, only qualified overtime pay is subject to the deduction — i.e., that which is paid in accordance with the FLSA. Employers throughout the country are required to comply with a myriad of federal, state and local laws governing the payment of wages. As a general rule, whenever these laws differ, employers are required to comply with the one that is the most favorable to an employee in any given situation or work week. Several states and localities have developed their own sets of laws governing overtime that are more favorable than the rules set forth in the FLSA. In those states, a significant question is whether the “overtime” paid pursuant to those non-federal laws falls within the deduction. Thankfully, Louisiana is not one of those states with a separate set of overtime laws. Here, employers are governed solely by the FLSA with respect to overtime, minimum wage and recordkeeping requirements. Nevertheless, it is important to ensure that you have a good understanding of what constitutes “overtime” under the FLSA. Just because an employer pays an amount for overtime does not render the payment as overtime “required by” the FLSA. IN THE DEALERSHIP SETTING, WHO IS “REQUIRED” TO RECEIVE OVERTIME UNDER THE FLSA? Dealerships — like other employers — will have several salaried employees who are exempt from overtime (and minimum wage and recordkeeping requirements) under the “white collar” exemptions found in the FLSA. These exemptions apply to those who are paid on a salary basis above the minimum threshold and perform duties that qualify as “executive,” “administrative” and/or “professional.” In a typical dealer group, these exemptions will generally apply to the general manager, department and sub-department heads, office managers, controllers and human resources managers. This is a good time to review your pay practices to make sure that you are keeping time records for and paying overtime to all employees who are non-exempt. 11
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