DOL Announces Final Rule on Overtime Regulations
New overtime regulations recently announced by President Barack Obama will extend overtime pay protection to more than 4 million additional workers within the first year of implementation and require immediate attention from employers. The new rules primarily affect employers paying overtime to employees whose job duties involve executive, administrative, or professional duties (the so-called “EAP” or “white collar” exemption). Business owners should consult their legal advisors to evaluate the impact the new standards may have on their business.
Highlights of the Final Rule issued by the U.S. Department of Labor (DOL) include:
- An increase in the threshold minimum salary to $913 per week ($47,476 annually rather than $23,660), which doubles the annual salary previously required for an EAP employee to be considered exempt from overtime pay.
- An increase in the “highly compensated employee” (HCE) exemption to $134,004 (up from $100,000) annually. The HCE exemption applies to employees that satisfy a minimal duties test (i.e., perform at least some EAP duties).
- An automatic adjustment in the minimum salary thresholds every three years.
- A provision that allows employers, for the first time, to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the new standard salary level. Discretionary bonuses and incentives still cannot be used to meet the standard salary levels.
The new rule is effective as of December 1, 2016. The automatic updates that will occur every three years begin January 1, 2020.
These new standards have many implications for employers, and because of the close effective date, require immediate attention. Millions of additional workers will be entitled to overtime pay with the December 1 deadline.
Employers are taking steps to ensure that they are in compliance with these new regulations. For example, some employers are:
- Conducting an audit of their workforce to determine who and how many employees will be affected. In some instances, the majority of the work force at a business may become non-exempt.
- Considering the reclassification of some employees as non-exempt as well as appropriate salary levels for these employees.
- Forecasting future overtime obligations.
- Considering hiring additional employees to maintain a 40-hour week for existing employees.
- Considering other alternative compensation methods to remain in compliance yet keep costs in line.
- Reviewing applicable state law requirements to ensure that they are currently being met.
Should you have questions about these new regulations, consult your legal advisor.