Overtime Rule Expected to Benefit Millions of Employees
On May 23, 2016, the United States Department of Labor (DOL) issued a new overtime rule under the Fair Labor Standards Act (FLSA).
The overtime rule is expected to automatically extend overtime pay eligibility to 4.2 million salaried workers. It will entitle most salaried white collar workers earning less than $913 a week ($47,475 a year) (“salary threshold”) to overtime pay if they work more than 40 hours in a week. The increase will go into effect December 31, 2016.
The overtime rule also requires that the salary threshold be automatically updated on January 1, 2020 in order to ensure that the benefits of the new rule are not lost by time and inflation.
Under the rule, an employer may use bonuses and incentive payments to satisfy part of the standard salary threshold if:
- the bonuses and incentives total no more than 10% of the employee’s regular compensation;
- the bonuses are non-discretionary (which means they are promised and must be paid at a fixed rate); and
- the payments must generally be made on a quarterly basis.
The DOL published questions and answers about its new final overtime rule at: https://www.dol.gov/whd/overtime/final2016/faq.htm
The rule does not change the “duties” test used by employers to determine whether white collar salaried workers that earn more than the salary threshold are eligible for overtime pay. That exemption is available when a salaried employee holds a bona fide executive, administrative, professional, computer, or outside sales position. These exemptions are sometimes referred to as “white collar” exemptions.
Information about white collar exemptions may be found in DOL Wage and Hour Division (WHD) Fact Sheets (published in 2009):
Executive Exemption: https://www.dol.gov/whd/overtime/fs17b_executive.pdf
Administrative Exemption: https://www.dol.gov/whd/overtime/fs17c_administrative.pdf
Professional Exemption: https://www.dol.gov/whd/overtime/fs17d_professional.htm
Computer-related Occupations Exemption: https://www.dol.gov/whd/overtime/fs17e_computer.pdf
Outside Sales Exemption: https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf
The information provided here is a brief summary of hundreds of pages of regulatory guidance. It is not intended to provide legal advice to a specific individual with an individual problem.