May 20, 2016
New Overtime Regulations Announced
Under the Federal wage and hour law, the Fair Labor Standards Act (FLSA), non-exempt workers are required to be paid overtime pay – 1.5 times their regular rate – for all hours worked in excess of forty (40) in a week There are exemptions to this requirement. The most common exemptions are the “white collar” exemptions because they primarily apply to executives, administrative, and professional employees.
In order to be an exempt white collar worker, the employee must satisfy three requirements: (1) they must perform duties that are specific to each exemption (for example, the executive exemption), (2) they must be paid on a salary basis, meaning that they receive their full salary in any week in which they work, with very few exceptions, and (3) their salary must be at least the minimum level.
The New Regulations:
It is this last requirement that has been changed by the new regulations. The old minimum, in place since 2004, was $455 per week, or about $23,660 per year or roughly $11.38 per hour.
The new regulations increase this new minimum to $913 per week, or about $47,476 per year. This translates to about $22.84 per hour. This annual amount will also be adjusted every three years, based on the 40th percentile of the weekly earnings for full time salaried workers in the lowest wage Census Region.
This means that most salaried workers whose salary was between these levels should expect a change in their compensation system, especially if they work over 40 hours per week. Employers might move such workers to a non-exempt hourly status, increase their salary to maintain exempt status, or make other changes. Under the new regulations, up to 10% of the salary amount can come from non-discretionary bonus, incentive payments, and commissions, as long as those payments are made at least quarterly.
Another exempt classification is “Highly Compensated Employees.” Previously, the salary test for these employees was $100,000 per year. The new annual salary requirement is $134,000, and their weekly salary must be at least the new minimum as well. This annual amount will also be adjusted every three years, based on the 90th percentile nationally of salaried workers. These workers must also perform exempt duties.
Workers currently paid on an hourly basis are not impacted by the new regulations.
Link to Department of Labor Announcement - https://www.dol.gov/whd/overtime/final2016/
Please email or call our office with any questions or to discuss how these changes impact your business.