The Department of Labor (“DOL”) just announced the publication of its Final Rule updating the overtime regulations.
The Final Rule focuses primarily on updating the salary and compensation levels for Executive, Administrative and Professional (EAP) workers to be exempt. Specifically, the Final Rule:
- Raises the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually). This is more than 2 times the current salary level of $455 per week; $23,600 annually;
- Sets the total annual compensation requirement for highly compensated employees (“HCE”) subject to a minimal duties test from the current $100,000 to $134,004; and
- The Final Rule permits employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The effective date of the Final Rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and the increase in the HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. The Final Rule does not change the “duties” requirements prong for EAP workers to qualify for exemption.
How does this impact you? This will impact each employer differently. HR specialists should identify currently exempt employees making less than $47,476 annually and develop a strategy for the identified/affected employees. Universally, employers will be forced to make a decision to either increase a current exempt employee perhaps earning $30,000 annually by over $17,000 (to $47,476) or convert the employee to hourly with all hours worked in excess of 40 hours per week being subject to overtime compensation.
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