President Obama and Secretary Perez declared the publication of the Department of Labor’s (DOL) final rule updating the overtime regulations on May 18, 2016. Within the first year of its implementation, it will automatically extend overtime pay protections to over 4 million workers. This much awaited update will go a long way in realizing President’s Obama’s commitment in ensuring that each worker is compensated reasonably for their work and will result in a significant boost to many worker’s pay.
What are the changes?
Some of the changes in regulations that are expected to make employers pay overtime to roughly 4 million additional US workers includes:
- Raising the bar for exemption from $100,000 to $134,000 for a “highly compensated employer” which will rise automatically every three years to the threshold wage level placed on the 90th percentile of weekly income for full-salaried employees;
- Allowing up to 10% of standard salary level to fall in from incentive payments, non-discretionary bonuses and commissions paid quarterly (at least)
- Raising the current minimum salary requirements for the administrative, IT, executive and professional employees to $913 per week ($47,476 per year) from $455 per week ($23,660 per year), which will automatically rise every three years to the threshold wage level base on the 40th percentile of weekly earnings for full-time salaried employees in the lowest-wage census region.
The DOL decided against making any changes to the duties at present. The employer groups strongly lobbied the DOL to not do any changes to the many duties as any changes might have escalated the compliance costs.
How much time is left?
The final rule will be effective from December 1, 2016, which provides the employers with more than six months to prepare. Initially, the rise to the HCE total annual compensation requirement (from $100,000 to $134,004 per year) and standard salary level (from $455 to $913 per week) will be effective. The automatic updates to these thresholds in the future will happen every three years, starting January 1, 2020.
Even though, the final rule has been reviewed and approved by the Offices of Management and Budget (OMB), the document has not yet been published in the Federal Register. The final rule that might appear in the Federal Register may consist of small formatting differences in accordance with the Office of the Federal Register publication needs. As a convenience to the public, the OMB-approved version is being provided and the website should be updated with the Federal Register’s published version when it becomes available.
This dramatic rise in the salary threshold will need most employers to do some major changes in order to make sure that their organization is compliant.
For more on DOL’s final overtime rule join expert speaker Dayna J. Reum in a Live Webinar by expert speaker Dayna J. Reum, who will discuss how to balance state and federal laws, and what law is appropriate and when. She will also discuss details about state and federal changes in both minimum wage and overtime, and its impact on employers.