DOL’s Final Overtime Rule: Are You Ready?
The long-awaited update to overtime regulations was published on May 18, 2016. The new rule will result in additional overtime pay for an estimated 4 million workers.
The effective date of the final rule is December 1, 2016.
What Has Changed
- The Final Rule sets the standard salary level required for exemption at $913 per week or $47,476 annually for a full-year worker. In addition to the salary level, workers must still pass one of the duties tests (Executive, Administrative or Professional) in order to meet the criteria for exemption.
- Up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly.
- The total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test has been increased to $134,004.
- Beginning January 1, 2020, salary and compensation levels will be automatically updated every three years to maintain the levels at specified percentiles and to ensure that the tests for exemption are useful and effective.
What Hasn’t Changed
- The duties tests remain the same.
- There are no changes to FLSA coverage. Generally, employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more are covered by the FLSA. In addition, employees of certain entities are covered by the FLSA regardless of the amount of gross volume of sales or business done. These entities include: hospitals; businesses providing medical or nursing care for residents; schools (whether operated for profit or not for profit); and public agencies.
What You Need to Do
- Review the jobs within your organization to validate the correct exemption status.
- For jobs where salaries do not meet the new threshold consider the following options:
- increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
- reduce or eliminate overtime;
- pay the overtime premium (one and one half times the employee’s regular rate of pay for overtime hours worked);
- reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant
For further assistance contact TAMS Group at [email protected].