As with most legislation, the Department of Labor’s (DOL’s) recent overtime threshold regulation comes with a wave of complexities and special rules that employers must navigate. Don’t get tangled up digging for the details. Check out our overtime overview, providing clarity on some of the rule’s most sticky requirements.
- Duty classification
Exemption status is determined by job duties. Avoid mistakenly classifying an employee as exempt simply because they are paid on a salary basis or have a job title that is commonly associated with exempt positions. The first step in assessing the impact of the updated overtime threshold is confirming that positions are properly classified, per the DOL’s duties tests.
- Highly compensated employees
A highly compensated employee (HCE) is currently classified as an employee making $107,432 on an annual salary or fee basis. Effective July 1, the level will increase to $132,964. HCEs are exempt if their primary duties include office or non-manual work, and they “customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.” Despite being highly compensated, an HCE classification does not negate the need for the duties tests.
- Factoring in bonuses
Nondiscretionary bonuses, incentive payments and commissions may be credited for up to 10% of an employee’s standard salary level. Effective July 1, when the annual threshold is raised to $43,888, employers must pay impacted employees at least 90% of the standard salary limit, or $759.60 weekly, each pay period. The
remaining 10% differential can then be satisfied with nondiscretionary bonuses or incentive payments that are disbursed at least annually.
- Legal battles
While changes are poised to go into effect July 1, the DOL’s ruling is ensnared in some legal challenges. More than a dozen business groups sued the DOL in a Texas federal court, arguing that the department overstepped its power under the Fair Labor Standards Act (FLSA) and violated the Administrative Procedure Act (APA). Bukaty Companies will continue to monitor the situation, and release updates as necessary