The U.S. Department of Labor (DOL) has announced a new “salary level” to the so-called white collar overtime exemptions under the Fair Labor Standards Act. In short, the new rules take effect December 1, 2016, and will more than double the salary level for those employees classified as exempt from overtime pay from the current level of $23,660 to the new level of $47,476, or $913 per week. The highly compensated executive salary level has been raised to $134,000. The new rule is expected to impact millions of employees and is expected to be especially hard on small businesses, nonprofits, many retailers, and employers in some regions of the country.
The DOL also announced that the salary level will be adjusted automatically every three years, based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest-wage Census region. Historically, the DOL has taken the position that future adjustments in salary level required new rule-making.
These new regulations take effect December 1st of this year so planning for these changes should be taking place now. Many companies will be faced with raising the salary of employees close to the threshold limit or convert them to “hourly” and be required to pay OT. One minor concession is that up to 10% of the salary can be non discretionary bonuses and incentive plans which will help offset the salary requirement.
Timekeeping an reporting will be a major part of this new rule as many employee will now have to “punch the clock” and track time. If they are used to responding to emails, phone calls, and texts after hours or on the weekend, then you will need to formalize this process for tracking time and approving these hours.