After much anticipation, the United States Department of Labor (“DOL”) issued its final overtime rule on May 18, 2016. The DOL’s website provides a link to the rule itself, frequently asked questions including a side-by-side comparison of the old and new rules, fact sheets, and other summary guides.
The effective date of the final rule is December 1, 2016. A brief summary of the rule’s central provisions:
- The minimum salary level for Executive, Administrative, and Professional exempt employees is raised from $23,660, or $455 per week, to $47,476, or $913 per week (note that this is slightly less than the $50,440 level listed in the DOL’s proposed rule). Keep in mind that, in addition to meeting the minimum salary threshold, an employee must also meet the applicable duties test in order to qualify as an Executive, Administrative, or Professional exempt employee. The new rule does not change the existing duties tests.
- Nondiscretionary bonuses and incentive payments (including commissions) may now satisfy up to 10% of the minimum salary level for Executive, Administrative, and Professional exempt employees. These payments must be paid to employees at least quarterly (or more frequently). Employers may use a “catch-up” payment at the end of the quarter, which means that if an employee has not been earned enough in non-discretionary bonuses and/or incentive payments at the end of the quarter to meet the minimum salary level, the employer may pay the employee the difference and will not forfeit the exemption.
- The total annual compensation for highly compensated employees is raised from $100,000 to $134,004. Keep in mind that highly compensated employees are also subject to a minimal duties test.
- The minimum salary and compensation levels will be updated every three years, beginning January 1, 2020.
The above information is not legal advice and does not create an attorney-client relationship. If you have any questions regarding the new DOL overtime rule, please contact Joe Younker at 319-358-5569 or via email at firstname.lastname@example.org.