Government Releases New Overtime Exemption Rule
iStock-vaccine.jpg (iStock-vaccine.jpg)

LR-Calculator-1Late yesterday (May 17, 2016), the United States Department of Labor finally released its long-awaited new rule for determining which American workers are entitled to overtime pay – time-and-a-half for hours above forty in any workweek – and which are not. On the key issue of the salary threshold – the amount that an employee must earn, on a salary basis, to be potentially exempt from the overtime requirement – the Department backed slightly off the figure it had proposed last July, but the new threshold – $47,476 annually – is still more than twice the previous minimum salary level.

The Final Rule (available here) sets the minimum salary for exempt executive, administrative, and professional employees at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South.  Initially, that figure is $913.00 per week, or $47,476 per year.  The threshold will be updated every three years.   The amount is slightly less than the Department originally proposed, which would have been based on the 40th percentile of earnings of full-time salaried workers nationally. That approach would have resulted in a threshold salary above $50,000 annually, and would have been updated more frequently.

Recall that to be overtime exempt, an employee must not only earn at least the minimum amount on a salary basis, but must also perform exempt duties. Significantly, the Department did not change the duties tests for the “white collar” exemptions.  There was speculation that the new Rule would address the question of what proportion of an employee’s time has to be spent on “exempt duties” in order for the employee to qualify as exempt.  But the Department says it believes the new salary threshold will work effectively with the existing duties tests to properly distinguish between exempt and non-exempt workers.

Also significant is a provision in the new Rule allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary threshold.  Such bonuses and incentives must be paid out at least quarterly.

Finally, the new Rule increases the total compensation requirement for exempt “highly compensated employees” – an exemption not recognized under Connecticut law – at the 90th percentile of full-time salaried workers nationally, or $134,004 annually.

The Department has released a useful fact sheet on the new Rule, as well as an FAQ document. Unless forestalled by action in Congress, the new salary threshold will become effective December 1, 2016, so employers have less than six months to determine how to adjust to this new reality.

 

This blog/web site presents general information only. The information you obtain at this site is not, nor is it intended to be, legal advice, and you should not consider or rely on it as such. You should consult an attorney for individual advice regarding your own situation. This website is not an offer to represent you. You should not act, or refrain from acting, based upon any information at this website. Neither our presentation of such information nor your receipt of it creates nor will create an attorney-client relationship with any reader of this blog. Any links from another site to the blog are beyond the control of Pullman & Comley, LLC and do not convey their approval, support or any relationship to any site or organization. Any description of a result obtained for a client in the past is not intended to be, and is not, a guarantee or promise the firm can or will achieve a similar outcome.

PDF
Subscribe to Updates

About Our Labor, Employment and Employee Benefits Law Blog

Alerts, commentary, and insights from the attorneys of Pullman & Comley’s Labor, Employment Law and Employee Benefits practice on such workplace topics as labor and employment law, counseling and training, litigation, immigration law and union issues, as well as employee benefits and ERISA matters.

Other Blogs by Pullman & Comley

Connecticut Health Law Blog

Education Law Notes

For What It May Be Worth

Recent Posts

Archives

Jump to Page