The much-talked-about white-collar exemption rule takes effect December 1, 2016. The Final Rule overhauls decades-old salary thresholds that excluded overtime pay for anyone making $23,660 in a recognized “white collar’ position. The new, higher salary limits will extend overtime pay protection to more than four million workers withinthe first year of implementation.
The changes focus primarily on updating the salary and compensation for Executive, Administrative and Professional workers to be exempt from overtime. The duties test for the exemption has not been changed.
Key provisions of the Final Rule:
- The current standard salary level required for exemption increased from $455 a week ($23,660 annually for a full-time worker) to $913 per week ($47,476 annually for a full-time worker).
- The total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test increased from $100,000 to $134,004 per year.
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Establishes a mechanism for automatically updating the salary and compensation levels every three years, with the first update to take place in 2020.
The Final Rule allows employers to use non-discretionary bonuses, incentive payments or commissions to meet up to 10% of the new standard salary level.
Employers affected by the change should have strategies in place to either reclassify employees or make salary changes. The Department of Labor has released helpful guidance on the topic addressing the salary and duties test employers need to meet to ensure compliance.
Questions about the changes can be directed to Shirley Lind, CEBS, SPHR, who leads Bukaty Companies’ Human Resources division, at slind@bukaty.com.
