The New Overtime Exemption Rule: Are You Ready for the December 1st Implementation?

In May, when the Department of Labor (DOL) released the long-anticipated changes to the Overtime Exemption Rules, most organizations took notice and engaged in an initial flurry of activity. In the event your organization decided to adopt Scarlet O’Hara’s philosophy of “worrying about it tomorrow”, we want to remind you of the DOL’s recent changes and the implications for your business, and propose some next steps to ensure compliance. We encourage you to put a plan in place today to take advantage of this “unique” opportunity.

Summary of Key DOL Changes:

  • Minimum salary level threshold increased from $23,660 per year to $47,476 per year ($913 per week), effective December 1, 2016 through the end of 2019.  To continue to classify positions as exempt, this new salary level must be met.  Starting on January 1, 2020, the minimum salary level will be updated/indexed/increased every 3 years.
  • Nondiscretionary bonuses and incentive payments (including commissions) can be used to satisfy up to 10% of the minimum salary level.
    • Assuming $47,476 total compensation, up to $4,747 can come from nondiscretionary bonuses, including those tied to productivity and profitability.
    • Must be paid on a quarterly or more frequent basis, and can include an employer “catch-up” payment to reach the 10% threshold.
  • Highly Compensated Employee (HCE) salary level threshold increased from $100,000 to $134,044 in total compensation per year, effective December 1, 2016 through the end of 2019.  Starting on January 1, 2020, the HCE salary level will be updated/indexed/increased every 3 years.
  • Of note, no changes were made to the Exempt Duties test. 

Business Implications & Action Items:

Despite the stress and headache these rules have likely caused, there may be a small silver lining.  The Department of Labor has given you a prime opportunity to focus on projects that have been on your to-do list for some time and a reason to give employees as to why you are doing it.  With fewer than 90 days to go, now is the time to:

  • Evaluate your current organizational structure, making any needed adjustments.
  • Review all job descriptions, ensuring they are accurate and properly classified as either exempt or non-exempt from overtime.  This includes analyzing employee’s compensation in light of the new salary level threshold.
  • Ensure overtime, time and attendance, and other relevant policies and procedures are reviewed and up-to-date.
  • Understand the implications to employees and the organization.  Carefully manage the change, its messaging to impacted employees and the roll out of any new or updated policies/practices.
  • Train HR professionals and/or leaders on how to effectively manage the change and provide them with best practices for managing non-exempt employees and overtime.
  • Budget and plan for any pay adjustments, overtime costs and future increases to the DOL’s salary thresholds.

How We Can Help:

Overwhelmed with your current priorities and workload?  Wondering how you can fit a project like this into an already crazy schedule and overflowing to-do list?  Clark & Gotzler has experienced HR professionals who will work closely with you to determine the level of support your organization needs.  We can help with all of the above mentioned items as well as many more.  Call us today to schedule an initial meeting.  Let us help you be fully compliant by December 1, 2016.