Rule Takes Effect Dec. 1
Click here to view a chart showing differences between current regulations and the final rule
On Wednesday, the U.S. Department of Labor issued the final version of a much-anticipated overtime exemption rule, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act's “white collar” exemption to $47,476 per year. The final rule will broaden federal overtime pay regulations to include more than 4 million more people and take effect on Dec. 1, 2016.
Many of our clients have been “waiting for the other shoe to drop” with respect to the proposed revisions to the “white collar” exemptions to the overtime requirements under the Fair Labor Standards Act, since the proposed (revised) rules were announced in June of 2015, and since the comment period ended last September. Well, it has dropped, and after receiving some 300,000 comments, there was good news and bad news for employers in the final rules, which will be effective Dec. 1, 2016.
The good (or, more accurately, “less bad”) news is that the new minimum salary requirement (to qualify for the exemptions) was lowered from $50,440 ($970/week) under the initial proposal to $47,476 ($913/week) under the final rules. Additionally, the minimum salary level will be subject to adjustment every 3 years, rather than annually, as initially proposed, qualifying non-discretionary bonuses and/or incentive payments (such as commissions) may be used to satisfy 10% of the minimum salary requirement, and there were no changes to the duties test, as was initially possible and feared.
The bad news is that, effective Dec. 1, 2016, many employees who are presently exempt and earning between $23,660 and $47,475 as annual salaries, will no longer be exempt, entitling them to overtime pay for hours worked in excess of 40 hours in a workweek and requiring employers to review/revise job classifications and compensation levels and/or implement pay plans in order to mitigate the impact on their bottom line and comply with the law.
Please let us know if we can help, as there are several ways to comply with the law WITHOUT simply raising salaries to the new minimum requirement.