New Federal Overtime Rule: Does It Impact You?

The Final Rule:

  • Raises the annual salary threshold from $23,660 to $47,476, or from $455 to $913 per week for executive, administrative and professional white collar exemptions from the overtime provisions under the Fair Labor Standards Act. This change mainly affects retail and convenience stores.
  • Updates the new salary threshold every three years beginning January 1, 2020, to ensure the threshold is maintained at the 40th percentile of the earning of full-time salaried workers in the lowest income region of the country. Based on projections of wage growth, the threshold is expected to rise more than $51,000 with the first update on January 1, 2020.
  • Raises the “highly compensated employee” (HCE) exemption annual salary threshold from $100,000 to $134,004, equal to the 90th percentile of the earnings of full-time salaried workers nationwide; and provides for updates every three years.
  • Make no changes to the “duties test” under the white collar exemptions; workers earning more than the salary threshold are still subject to the duties test to determine eligibility for overtime. No changes were made to the duties test for the Highly Compensated Employee exemption as well.
  • Allows bonuses and incentive payments to now count towards up to 10 percent of the new salary level for the executive, administrative and professional white collar exemptions, where such payments are paid at least quarterly; the DOL did not make changes to how employers may use bonuses to meet the salary level component of the HCE salary test.

The Final Rule takes effect December 1, 2016.

 

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