United States Department of Labor Overtime Rule Change Takes Effect December 1, 2016

**Please Read ROZARIO Spotlight for update regarding DOL Overtime Rule


September 19, 2016 |  On May 18, 2016 the Department of Labor issued the new overtime rule updating overtime regulations determining which white-collar, salaried employees are entitled to the Fair Labor Standards Act’s minimum wage and overtime pay protections.

The rule, which takes effect December 1, 2016, will automatically extend overtime pay protections to over 4 million workers. The rule increases the salary threshold, below which most white-collar, salaried workers are entitled to overtime, to $913 per week (or $47,476 annually) from $455 per week (or $23,660 annually).

The rule also updates the total annual compensation level above which white collar workers will be ineligible for overtime, the Highly Compensated Employees (HCE) salary level. The rule raises this level from $100,000 to $134,004 per year.

Each successive year the above thresholds remain, fewer and fewer workers receive these benefits as wages increase overall over time. Therefore, the rule puts into place an automatic update to the salary threshold every three years, beginning January 1, 2020. The update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020. The HCE threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020.

Additionally, the rule will allow up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions. However, these payments must be made on at least a quarterly basis.

It is noted that the “duties test,” that determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay, remains unchanged. However, due to the higher salary threshold, determination of whether an employee is entitled to overtime pay may be made solely upon salary level rather than the duties test—in other words, fewer employees are subject to the duties test.

If you have questions about your potential change in status as an employee or you are an employer and have questions about your options under these new rules, contact our office for exceptional guidance.

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