The Department of Labor (DOL) announced its final rule raising the bar for exemption from the overtime provisions of the Fair Labor Standards Act. Most notably, the rule raises the salary threshold for the white-collar exemptions from $23,660 annually ($455/week) to $47,476 annually ($913/week). Thus, any employee paid a salary of less than $47,476 will not qualify for exempt status and must be paid overtime for all hours beyond 40 in a workweek, regardless of the type of work that the employee performs. The new rule is effective December 1, 2016.
Beyond the new salary threshold, the final rule also makes the following changes:
- Automatic adjusting: The rule provides a mechanism to raise the salary threshold every three years (the proposed rule had provided for annual adjusting.) The first update will take effect January 1, 2020.
- Bonuses: For the first time, bonuses, incentive payments, and commissions may be counted toward the salary threshold, but only if they (a) are non-discretionary, (b) are paid at least quarterly, and (c) fulfill no more than 10% of the salary threshold ($4,747.60).
- Duties test: While there was some concern that the DOL would restrict the type of work that would qualify for exempt status, the DOL elected to leave the duties test alone. Therefore, an employee who performs executive, administrative, or professional work that has traditionally met the test for exemption will continue to be exempt as long as he/she meets the new salary threshold and is paid on a salary basis.
- Highly compensated employees: The salary threshold for highly compensated employees will raise from $100,000 to $134,004. This little-used rule provides a shortcut to the duties test, but as a practical matter, nearly any employee paid at this level already meets the standard test for exempt status.
For more information regarding the changes in the overtime regulations, visit: https://www.dol.gov/whd/overtime/final2016/