After proposing its Final Rule on July 6, 2015 and receiving over 270,000 comments, the Department of Labor has published the Final Rule implementing significant changes to overtime regulations. The changes will go into effect December 1, 2016. Here is a summary of the significant changes:
- Under the executive, administrative, and professional exemptions, the salary that must be paid to the employee was increased from $23,660/yr. to $47,476/yr. (which the DOL says is the 40th percentile of salaried workers);
- Under the Highly Compensated Employee exemption, the total compensation that the employee must be paid was increased from $100,000/yr. to $134,004/yr (which the DOL says is the 90th percentile of salaried workers);
- Both of the salary thresholds above will be updated every three years beginning January 1, 2020 so that the amounts reflect the 40th and 90th percentiles, respectively;
- For the first time, employers will be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level required for the executive, administrative, and professional exemptions; and,
- As expected, but nevertheless significantly, there are no changes to the “duties tests” that executive, administrative, or professional employees must perform in order to qualify for the exemption;
These changes are expected to provide overtime compensation to an estimated 4.2 million workers who were not previously entitled to it. The impact on retail, hospitality, and other businesses who have managers or assistant managers that are paid a salary in the $30,000-$45,000 range will be significant, as they will face a decision to increase the employee’s salary or pay them time-and-a-half for hours worked over 40 in a workweek.
The DOL’s Fact Sheet summary on the new regulations can be found here.