The U.S. Department of Labor (DOL) has published its much-anticipated and highly controversial final rule on overtime eligibility for salaried workers. Most significantly, the rule doubles the current salary threshold for determining whether an employee is entitled to overtime pay from $23,660 per year ($455 per week) to $47,476 per year ($913 per week).
As a result of the new rule, which goes into effect on December 1, 2016, any salaried employee making less than $47,476 will be automatically entitled to overtime pay regardless of the worker’s duties. The rule also automatically increases the new salary threshold level every three years beginning in 2020.
The final rule does reduce the new salary threshold slightly from the $50,440 originally proposed, and mandates inflation adjustments every three years instead of annually. In addition, the rule does not include any revisions to the so-called “duties” tests for determining whether a person qualifies as an overtime-exempt executive, administrative, or professional employee. In one other ameliorating provision, the rule allows employers to include nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the minimum salary requirement.
Employers with salaried workers who are currently treated as “exempt” under the Fair Labor Standards Act (FLSA) and make more than $23,660 but less than $47,476 will have challenging decisions going forward on whether to bump employees above the new salary threshold, reclassify the employees as nonexempt and pay them overtime, and/or restructure particular jobs.
A copy of the lengthy final rule and supplementary materials prepared by DOL can be found here.
Members of the Equal Employment Advisory Council (EEAC) can read more here.