The DOL has issued its long-awaited Final Rule that will make it harder for many workers to qualify for the overtime exemption. The Final Rule goes into effect Dec. 1, 2016. The key provisions include:
- Raises the salary threshold for overtime exempt status from $455 a week to $913 a week ($47,476 per year)
- Increases the threshold to qualify for the “highly compensated employee” exemption from $100,000 to $134,004 per year
- The salary threshold will be adjusted every 3 years, beginning January 1, 2020, based on census data
- For the first time, employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary test. To qualify for this credit, the nondiscretionary payments must be paid on a quarterly or more frequent basis and employers can make a “catch-up” payment if an employee doesn’t earn enough nondiscretionary payments in a given quarter to meet the standard salary level test.
Notably, the final rule does not change any of the existing job duties requirements to qualify for an exemption.
What to do? Identify current exempt employees who will lose exempt status based on the increased salary threshold and either reclassify these employees as non-exempt or raise their salary/nondiscretionary compensation to meet the new salary test. We are available to assist you navigate this new rule and ensure your organization is in compliance.