New Overtime Rules go Into Effect December 1

The new rules proposed by the U.S. Department of Labor that will greatly increase the minimum salary requirement for employees to be considered exempt from overtime under the executive, administrative or professional exemptions have been adopted and will go into effect on December 1, 2016. The new rules key the minimum salary requirement to what the DOL determines is the 40th percentile of the salaries for all full-time salaried employees, currently $913 per week or $47,476 annually. Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10 percent of the required minimum salary.

While this increase is less than what was originally proposed ($921 per week), it is still more than double the current $455 weekly salary threshold. Under the final rules, the minimum annual salary will not increase each year, but will be reviewed and could be increased every three (3) years as the annual salaries of full-time salaried employees increase. The threshold annual salary for the “highly compensated” exemption will be raised to $134,004.

In the interim, the House and Senate bills that would block the new overtime rules, Senate Bill 2707 and House Bill 4773 are still in committee.

All employers need to review their compensation structure and determine whether or not the employees they are treating as exempt under the administrative, executive or professional exemptions will meet the new minimum salary threshold, and either adjust employee salaries or prepare to treat employees whose salaries fall under the new threshold as non-exempt for overtime purposes.

If you have any questions or would like additional information, please contact Nancy Abrams at nabrams@lawsgr.com or 215-241-8894

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