U.S. SUPREME COURT AND OVERTIME UPDATE: The U.S. Department of Labor Increases Minimum Salary Requirement for Employees Exempt from Overtime.
The U.S. Department of Labor has issued the final version of a much anticipated overtime exemption rule that focuses primarily on updating the salary and compensation levels needed for workers to be “exempt” from the overtime rules. An “exempt” employee must generally meet the minimum salary requirement, which the employer pays the employee regardless of the quality or quantity of work, and the employee’s primary duties must meet certain criteria. Effective December 1, 2016, the minimum salary requirement to qualify for the executive, administrative or professional exemptions from overtime rises from $23,660 to $47,476 per year, and the total annual compensation requirement for the highly compensated employee exemption (employees whose primary duties include performing office or non-manual work and who customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee) rises from $100,000 to $134,004 per year. The final overtime rule also establishes a mechanism for automatically updating the salary and compensation levels every three years, starting on January 1, 2020. Additionally, the final overtime rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new minimum salary requirement. According to the DOL, this rule will affect over 4 million workers within the first year of implementation.
While employers may raise employee salaries in order to comply with this new overtime rule, many exempt workers will be reclassified to hourly employees and their hours will be cut to avoid overtime. Employers will need to monitor overtime closely to reduce the risk of being targeted in what will inevitably be a slew of new wage and hour lawsuits. Among other things, many more employees will have to track their hourly time worked, which, again, will expose employers to additional civil liability.
If you would like to discuss the new overtime regulations or your employees’ classifications, please contact firstname.lastname@example.org.