The DOL has officially announced its final rule updating overtime regulations. Here’s the skinny:
Workers who earn less than $47,476 annually, regardless of whether or not they qualify otherwise for an FLSA worker exemption for overtime, will now be subject to overtime wages when working more than 40 hours/week in states that follow the federal standard. (States with more restrictive overtime rules must apply the new minimum threshold of $47,476 in annual income when their overtime eligibility applies.)
Exempt employees earning more than *$47,476 annually (meaning employees who qualify to NOT be paid for overtime wages per one of the FLSA Executive, Administrative, or Professional worker exemptions) will not be affected.
- Up to 10% of this annual income amount can include nondiscretionary bonuses and incentive payments (including commissions).
Highly compensated employees must earn *$134,004 to be exempt from overtime when they do not qualify for an FLSA Executive, Administrative, or Professional worker exemption, but do satisfy at least a minimum essential duties test.
The effective date is December 1, 2016. Salary and compensation levels will automatically be updated every three years to maintain the levels at the predetermined *percentiles, beginning on January 1, 2020.
Employers who currently have exempt workers making more than $23,660/year ($455/week) need to begin formulating a plan for compliance. Options may include:
- Limiting overtime work altogether
- Tightening workplace flexibility, particularly in cases where employees work 35 hours one week and 45 the next, and so on
- Procuring a time keeping system and getting employees set up
- Reducing hourly wages to account for overtime pay for workers who regularly work overtime to maintain current annual compensation amounts (Warning: you may have morale problems with this option)
- Increasing wages (when close to the minimum amount) to maintain the overtime exemption
Please consult with your Stratus.hr Rep to help you formulate your company’s plan. For questions or concerns, please contact us.
*How the dollar amounts were determined:
1. The minimum amount an exempt employee must earn annually is calculated to be at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region of the nation. Currently, that region is the South ($913 per week; $47,476 annually for a full-year worker).
2. The total annual compensation requirement for highly compensated employees is calculated to be at the 90th percentile of full-time salaried workers nationally. Currently, that amount is $134,004.