Overtime - Department of Labor Updated "White Collar" Exemptions - 6/15/16
The United States Department of Labor has issued a new rule that updates the regulations determining overtime exemptions for white-collar, salaried employees under the Fair Labor Standards Act (“FLSA”). The rule significantly increases the salary threshold below which most white-collar, salaried workers are entitled to overtime from the current $455 per week (or $23,660 for a full-year worker) to $913 per week (or $47,476 for a full-year worker). The new rule also increases the total annual compensation requirement for highly compensated employees (HCE), subject to a minimal duties test, from $100,000 to $134,004. This final rule is effective on December 1, 2016. The DOL will also update the salary threshold every three years, based on wage growth.
By more than doubling the yearly salary threshold (to $47,476 a year) under which these workers qualify for overtime, the DOL estimates that more than 4.2 million people will now have overtime protection or get a raise above the new threshold.
The new rule does not change the “duties” requirement for overtime exemption. In addition to meeting the salary threshold, workers have to perform very specific duties to qualify for the overtime exemption. For example, performing “executive” duties means supervising the work of two or more employees and “administrative” duties requires the exercise of discretion and independent judgment, among other criteria. In order for an exemption to apply, employees must still meet these requirements regarding their job duties.
WHAT DO EMPLOYERS NEED TO KNOW
Employers should start by determining which employees could be affected, paying particular attention to those employees earning salaries less than the new threshold amount of $47,476. Business owners should have a plan in place for each of these employees, as they may become eligible for overtime pay. Depending on their current salary, their duties and the number of hours they work, each employee will have a different outcome. Employers should track hours worked, even if an employee is salaried, to insure overtime compliance. If a previously exempt employee is earning less than the new salary threshold and works more than 40 hours each week, the employer should consider bumping up the employee’s salary to avoid overtime issues.
This document has been provided for informational purposes only and is not intended to nor should it be construed to constitute neither legal advice nor the creation of an attorney-client relationship. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company.