“Final Rule” increases minimum salary required for many overtime exemptions to $47,476 annually

On December 1st of this year, more than an estimated four million workers that were once exempt from overtime pay will become eligible to receive overtime.  See Final Rule: Overtime, U.S. Dept. of Labor Wage & Hour Division, (Dept of Labor Link) (last viewed 8/2/16).

This extension of overtime pay will be a result of the U.S. Department of Labor (“DoL”) exercising its rulemaking authority under the Fair Labor Standards Act (“FLSA”).  The FLSA lays out federal minimum wage and federal overtime laws. Under the new regulations, the federal government is doubling the minimum salary required for executive, administrative, and professional employees to qualify for the overtime exemption.

Once effective, these new federal regulations will increase the minimum salary level for most exempt white collar workers from $455 per week to $913 per week.  In terms of an annual salary, this is an increase from a roughly $23,660 annual salary to a $47,476 annual salary. This minimum salary will automatically update every three years.

Along with the increased requirement in base salary, changes to overtime regulations will allow certain employers to utilize nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new minimum salary level.

Generally speaking, these regulations are applicable to employers that gross more than $500,000 in annual sales/revenue or have employees that perform tasks connected to interstate commerce.  This is a relatively low threshold, so the safe course of action would be to treat the rules as being applicable to your business, unless you have specifically discussed them with an attorney and determined that your company is exempt.

The new rules are not changing the existing job duties required to qualify for the affected executive, administrative, and professional exemptions – instead the regulations are affecting the required minimum pay.

Keep in mind that this is not a minimum wage law. Instead, it is the minimum salary required to make a certain category of employee exempt from overtime regulations. Even if your salaried employees do not generally work overtime, one practical effect of this rule change is that employers will have to keep track of nonexempt employees’ hours to avoid later claims that the employee worked overtime but did not receive overtime pay.

Should you have any questions or if you are unsure whether these provisions affect your business or whether or not you can utilize the incentive payments as part of a salary, feel free to contact the attorneys at Wolff, Hislop & Crockett, PLLC.

We have attorneys that can provide guidance with regards to compliance with wage regulations and resolving wage disputes.


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