The Fair Labor Standards Act requires employers to pay employees overtime at a rate of 1 ½ times their normal hourly rate. However, employers can exempt certain categories of employees from the overtime requirement if they fit into an exempt job classification.
The Department of Labor (DOL) sets minimum salary levels required to meet this exemption. DOL released its final version of new regulations concerning salaries for employees exempt from overtime pay today. The new rule goes into effect December 1, 2016.
Some, but not all, exempt job classifications require the employer to pay the employee on a “salary basis.” As a general rule, “salary basis” means the employee receives a regular, unchanging amount of pay from paycheck to paycheck, without deductions for hours missed and no additional pay for working more than 40 hours in a workweek. DOL has consistently refused to consider commissions and bonuses as part of salary for this calculation.
The current salary needed to meet the minimum “salary basis” test is $455 per week ($23,660.00 annually). DOL set this minimum salary level in 2004. Although the minimum is stated as a weekly amount, exempt employees can be paid on any regular schedule—weekly, biweekly, monthly or semi-monthly.
The rule issued by the DOL today a little more than doubles the minimum salary basis to $913 per week ($47,476 annually) beginning December 1 of this year. The new rule also implements an automatic increase in the minimum salary basis every three years to adjust to the 40th percentile of full-time salaries earned by workers in the lowest-wage Census region.
Finally, the new rule increases the amount of the highly compensated employee exemption to $134,004.00 from $100,000.00. This amount includes all non-discretionary compensation such as commissions and nondiscretionary bonuses.
Now is the time for all employers, large and small, to review all job descriptions with your attorney to determine compliance with the new rule and how it will impact your business on December 1, 2016.