Beginning December 1, 2016 employers will have to pay “white collar” workers a salary of $47,476 ($912 a week) and ensure that they meet certain job duties tests established by law or else pay them overtime, under new regulations issued this week by the U.S. Department of Labor. Bonuses and commissions can count toward as much as 10 percent of the salary threshold, provided they are made on a quarterly or more frequent basis.
The new salary threshold to treat workers as exempt from overtime under the Fair Labor Standards Act is more than double the existing threshold of $23,660 per year (or $455 per week) established in 2004. The DOL also increased the salary threshold for exempt “highly compensated” workers from $100,000 to $134,004. The DOL will automatically update the salary threshold every three years, beginning on January 1, 2020 to equal the 40th percentile of full-time salaried workers in the lowest-wage Census region. The highly compensated threshold will increase to the 90th percentile of full-time salaried workers nationally.
The DOL estimates an additional 4.2 million American workers will be eligible for overtime under the new regulations.
This new regulation will primarily affect employees who have been previously classified as executive, administrative, and professional employees (the “white collar exemptions”), and those employees in computer-related positions. Unless employees are paid the threshold salary minimum salary and meet the duties tests for one or more of the recognized exemptions, they must be paid overtime for hours worked in excess of 40 in any given week. Now, even if employees meet one or more of the recognized duties tests, unless they also meet the new higher salary threshold they must be paid overtime.
Employers are well advised to look carefully now at which employees are being treated as exempt and take steps to ensure they are in compliance by December 1, 2016.