On May 18th, the Department of Labor released the long-anticipated final rules defining overtime exemption requirements, including guaranteed salary requirements for white collar exemptions for executive, administrative, professional and highly compensated employees.
The new rules go into effect on December 1, 2016; key highlights include:
- Minimum guaranteed salary requirement of $913.00 per week ($47,476.00 annually); this salary requirement applies to the executive, administrative and professional exemptions.
- For the highly compensated exemption, the new salary requirement is 134,004.00.
- The DOL did not change the white collar exemption duties tests.
- The final regulation establishes a mechanism to update the salary requirement level every three (3) years.
Of noted importance, and as it relates to the Executive, Administrative and Professional Exemptions (Highly Compensated excluded), is the ability for the employer to apply Non-Discretionary Bonuses and Incentive Payments (including a valid commission payment) to satisfy up to 10% of the guaranteed salary level requirement of $47,476.00. Please note that Non-Discretionary Bonuses and Incentive Payments, such as commissions, must be well defined and meet the DOL’s requirements under the regulation.
What Employers Should Do NOW!
1) Assess your organization’s current liability by conducting a thorough review of salaried positions. Discuss and confirm appropriate application of the White Collar Exemptions based on the duties test alone.
2) Assess the hours of work performed by those salaried positions of which their current salary is less than the new guaranteed salary requirement. Determine if the position(s) can be limited to 40 hours of work or less per work week.
3) If necessary, and based on if hours worked exceed 40 in a work week (overtime), consider altering the position’s compensation structure to ensure compliance:
- Increase the guaranteed salary to the new required threshold of $47,476.00.00 ($913.00 per week). It is important to note that simply increasing the salary may not make the position exempt from overtime. The position must also meet the duties tests as outlined in the White Collar Exemptions.
- Change the salary to an hourly rate of pay with overtime (1½ times the regular rate of pay) for any hours that exceed 40 in a workweek.
- Implement the Fluctuating Workweek Method of payment. This method of payment provides a guaranteed salary per week with a straight time earnings calculation providing half (1/2) time for hours that exceed 40 in a workweek. Please contact SESCO if you wish to discuss this method of payment further.
- Revise the current pay plan implementing a Non-Discretionary or Incentive element applying up to 10% to the salary threshold.
To help you understand the specific step you need to take to be in compliance, NFDA will host a members-only teleconference on Thursday, July 14, from 1-2 p.m. CT. This teleconference will be free to the first registrant from each firm.