The DOL estimates 4.2 million salaried employees will be newly eligible for overtime when the new rule takes effect.
Every employer with employees classified as exempt, but earning less than $47,476 in annual pay, will need to make changes in order to comply with these new wage and hour regulations. Summary of New DOL Overtime RuleThe key provisions of the final rule, which will be effective on
December 1, 2016, are as follows:
� The salary basis test which is relevant to the administrative, executive, and professional exemptions under which most white collar employees are classified exempt, will increase to an amount equal to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region, which is currently the South. This will raise the salary basis test from $455 per week to $913 per week ($47,476 annual salary).
� The salary basis test for highly compensated employees will increase to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 per year to $134,004 per year. (REMINDER: The State of Oregon does not recognize the highly compensated employee exemption to overtime.)
� The salary basis test will now update automatically every three years, beginning on January 1, 2020. Currently, The DOL estimates the annual salary requirement will exceed $51,000 by 2020. The DOL will post new salary levels by August 1 prior to each three-year cycle.
� The final rule will allow up to 10 percent of the salary threshold for non-highly compensated employees to be met by non-discretionary bonuses, incentive pay or commissions, and even certain catch-up payments, provided these payments are made on a quarterly basis.
Recommended Actions for EmployersEmployers need to take action now to be ready for the rule by the December 1, 2016, effective date. Employers have choices about how to respond to the new rule.
One obvious option is to simply increase the annual salary of all employees currently and correctly classified as exempt to meet the new salary basis of $47,476.
However, employers have other options as well, including restructuring job duties, reclassifying currently exempt employees as non-exempt, hiring more workers to avoid the need for overtime hours or using bonus pay to partially satisfy the salary requirements while also incentivizing employee performance.
Additionally, all employers should also review the job descriptions of any exempt position to confirm every employee classified as exempt is truly performing a job that meets the duties test for the designated exemption as jobs can change over time. This new rule is an ideal opportunity to perform that review and make larger changes within your organization to ensure compliance with the applicable wage and hour regulations.
Unfortunately, new laws tend to also mean new lawsuits, so it is critical for every employer to take the necessary steps to be in full compliance with all wage and hour laws, particularly by the December 1, 2016, effective date of these new regulations.
Farleigh Wada Witt Can HelpThe employment lawyers at Farleigh Wada Witt can help you and your organization understand and implement the new rule. Our lawyers are knowledgeable and experienced in all aspects of wage and hour law. We understand there is not a "one size fits all" response to the new rule, and will work with you to create a response plan that fits your organization.