Currently, the salary threshold for overtime eligibility is $23,660 per year ($455/week). The new rule will require overtime pay for an employee who makes less than $47,476 per year ($913/week), meaning that the employee must be paid time and a half for hours worked over 40 each week. The Department of Labor states this will cover 4.2 million more employees, totaling about 35% of salaried workers.
This means that any employee earning less than the new threshold amount of $47,476 per year must be paid overtime for all hours over 40 in a week, effective December 1, 2016.
Thanks to Veena Iyer, attorney at SPACC member Nilan Johnson Lewis, for sending us the following details on the rule:
- Automatic adjusting: The rule provides a mechanism to raise the salary threshold every three years. (The proposed rule had provided for annual adjusting.) The first update will take effect January 1, 2020.
- Bonuses: For the first time, bonuses, incentive payments, and commissions may be counted toward the salary threshold, but only if they (a) are non-discretionary, (b) are paid at least quarterly, and (c) fulfill no more than 10% of the salary threshold ($4,747.60).
- Duties test: While there was some concern that the DOL would restrict the type of work that would qualify for exempt status, the DOL elected to leave the duties test alone. Therefore, an employee who performs executive, administrative, or professional work that has traditionally met the test for exemption will continue to be exempt as long as he/she meets the new salary threshold and is paid on a salary basis.
- Highly compensated employees: The salary threshold for highly compensated employees will raise from $100,000 to $134,004. This little-used rule provides a shortcut to the duties test, but as a practical matter, nearly any employee paid at this level already meets the standard test for exempt status.
Nilan Johnson Lewis also has information on creative solutions to help employers navigate these changes including the fluctuating workweek method and the Belo contract.
For more information, see the U.S. Department of Labor’s website, and this Minnesota Public Radio Piece.