New Changes to Overtime Rules Affect Millions of Workers
The Department of Labor (DOL) just released new rules that will affect millions of workers who are currently exempt from overtime. Workers can be exempt from overtime under a two part “white collar” exemption test – the first step is the salary test and the second test is the duties test. The DOL raised the minimum annual salary requirement to $47,476, making the first step in the two-part test impactful to millions of workers who were previously exempt. The rule goes into effect December 1, 2016.
As the current rule stands, the minimum salary requirement is $23,660 – an annual salary so low it rarely was a barrier to overtime exemption status. However, any worker previously exempted because they qualify under the “duties test” as an administrator, professional or bona fide executive, could now be eligible for overtime if they are making less than $47,476 annually.
The new rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level. Also, it includes provisions to adjust the minimum salary threshold every three years.
If you are an employer with workers who are currently exempt from overtime and the workers make less than $47,476 per year, you are likely affected by this rule and should immediately start to prepare for the change. Now is a good time to review your overtime policies, make sure they are being implemented consistently, and start to educate all workers about these policies. You can also consider whether raising a worker’s salary to the new minimum threshold is the best economic choice –e.g. if an worker consistently works overtime and it is not possible to hire another part-time worker to off-load the overtime hours.
If you have any questions or would like help to strategize how to seamlessly implement this rule change, please contact me at .