New Overtime Rules

Please review the following carefully.  If you pay exempt and non-exempt employees, this affects you directly.  The salary threshold for paying overtime has been shifted upward.

This is excerpted from the American Payroll Association’s Compliance Update of May 18, 2016:

Today, the U.S. Department of Labor released the final rules governing which executive, administrative, and professional employees (white collar workers) are exempt from the Fair Labor Standards Act’s minimum wage and overtime pay protections. The DOL last updated these regulations in 2004. 

Effective December 1, 2016, the final rule raises the salary threshold to $913 a week or $47,476 a year (up from $455 a week or $23,660 a year). 

The final rule focuses primarily on the salary and compensation levels needed for white collar workers to be exempt. Specifically, the rule: 

• Sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region (currently the South).

• Increases the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers, or $134,004 (up from $100,000).

• Establishes a mechanism for automatically updating the salary and compensation levels going forward. Future automatic updates to the thresholds will occur every three years, beginning on January 1, 2020.

• Allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level. The amounts must be paid on a quarterly or more frequent basis, but there is a provision allowing a “catch-up” payment to be made during the first pay period of the next quarter.

• Does not change any of the existing job duty requirements to qualify for an exemption. Both the standard duties tests and the HCE duties test remain unchanged. The final rule, which is scheduled to be published in the Federal Register on May 23, is available for preview. Additional information is available on the DOL’s website. 

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