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Department of Labor Issues Final Regulations on Overtime Pay Exemptions

On May 16, 2016, the U.S. Department of Labor (DOL) released its much anticipated new overtime regulations.  Under the final regulations, the salary threshold for white collar workers to be exempt from overtime pay was raised from $455 per week to $913 per week (or $47,476 annually for a full-year worker).  According to the DOL, this amount reflects the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region.  In addition, the salary threshold for highly compensated employees (who are subject to a minimal duties test) has been increased to $134,004 (or the 90th percentile of salaried workers’ earnings nationwide). 

The new regulations also provide that employers may use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement for white collar workers.  In order to be credited, the payments must be made on at least a quarterly basis.  Employers may also make these payments on a “catch-up basis” within one pay period to make up for a shortfall in salary, but such payments will be credited to the salary amount only in the preceding quarter.  The regulations, however, do not provide for any credit toward the salary threshold for highly compensated employees.

The final regulations also provide that every three years, the salary threshold for white collar workers will automatically adjust to the 40th percentile of full-time salaried workers in the lowest-wage Census Region, and the salary threshold for highly compensated employees will automatically adjust to 90th percentile of full-time salaried workers nationwide. The first adjustment will occur on January 1, 2020. 

The effective date of the final regulations is December 1, 2016.  Employers should begin taking steps to identify those employees who would lose their exemption under the new regulations so that they may effectively plan for the upcoming deadline.  Here is a link to the Department of Labor’s webpage dedicated to the new overtime regulations:

https://www.dol.gov/whd/overtime/final2016/

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