KEY PROVISIONS OF THE FINAL RULES:
On May 18, 2016, President Obama announced the publication of the Department of Labor’s final rule updating the overtime regulations. The new Regs will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. Key provisions are:
- The threshold income level at which workers are exempt from overtime pay of time-and-a-half wages has been significantly increased. The level is currently $23,360 a year. The new level is $47,476 a year for a full-time employee.
- The total annual compensation requirement for highly compensated employees has been increased from $100,000 a year to $134,004 per year and must pass the minimal duties test.
- There will be an automatic updating of salary and compensation levels every three years
- The Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The Final Rule is not changing any of the existing job duty requirements to qualify for exemption. The DOL expects that the standard salary level set in the Final Rule and automatic updating will work effectively with the duties test to distinguish between overtime-eligible workers and those who may be exempt. As a result of the change to the salary level, the number of workers for whom employers must apply the duties test to determine exempt status is reduced, thus simplifying the exemption. Both the standard duties test and the HCE – – highly compensated employees – – duties test remain unchanged.
EFFECTIVE DATE: December 1, 2016.
EFFECT: Workers who earn less than $913 per week ($47,476/yr.) will now be eligible for overtime pay if they work more than 40 hours a week.