The DOL Releases Final Overtime Rule
The U.S. Department of Labor has announced that the Final Rule on overtime exemptions would be released on May 18, 2016. Responding to public comment on the Notice of Proposed Rule Making (NPRM) released in the summer of 2015, the Department made the following key changes to the overtime regulations:
- Changes to standard salary level threshold: the new standard salary level threshold for white collar exemption is $47,476 per year, versus $50,440 per year, as proposed in the NPRM. The current standard salary level threshold is $23,660 per year.
- Changes to the Highly Compensated Employee (HCE) salary level threshold: the new HCE salary level threshold is $134,044 per year, versus $122,148 per year, as proposed in the NPRM. The current HCE salary level threshold is $100,000 per year.
- Auto-updates to standard salary level threshold and HCE salary level threshold: The new standard salary level threshold and HCE salary level threshold will be auto-updated to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region every 3 years, versus being auto-updated based on the national data annually. The current salary level thresholds are not auto-updated and have not been updated since 2004.
- Partial Employer Credit for Bonuses: The Final Rule will permit counting up to 10% of standard salary level from non-discretionary bonuses, incentive payments and commissions, paid at least quarterly, while the NPRM asked for comments on that issues. The current rule does not count nondiscretionary bonuses and commission.
- Standard duties test changes: The Final Rule provided no changes to the duties test, while the NPRM requests comments on whether the current duties test was working as intended. It is widely believed the DOL will release NPRM on the duties in the near future.
- Effective date: The Final Rule is set to take effect on December 1, 2016 in terms of changes to the standard salary level threshold and the HCE salary level threshold. Auto-updates will then take effect every 3 years, starting on January 1, 2020.
Although Congress will attempt to invalidate the rule, employers should start reviewing the salary levels of all exempt positions and meeting with HR and legal advisors to develop a plan for compliance with the Final Overtime Rule by December 1, 2016.
The Clark & Gotzler attorneys are ready to guide your Final Overtime Rule compliance.