In May, President Obama and Secretary of Labor Perez announced the publication of the updated Department of Labor overtime rules. It is estimated that the rule changes will result in over 4 million additional workers being eligible for overtime pay. The new rules become effective December 1, 2016. Employers should now be consulting with their labor and employment counsel to determine how to prepare and to verify they are in compliance with the new rules.
The rule changes focus primarily on the compensation amount needed for a worker to qualify as exempt (i.e. not subject to the overtime requirements). While an employee must still meet the “duties test” to qualify as exempt, the updated rules change the salary amount from $455/week (the equivalent of $23,660/year) to $913/week (the equivalent of $47,476/year) — essentially doubling the amount an employee must earn before satisfying the salary basis test to qualify as exempt.
In addition, the final rules also set the total annual compensation requirement for highly compensated employees at $134,000, and establish a mechanism for automatically updating the salary and compensation levels every three years.
The significant change in the salary requirement is causing employers the most concern. Strategies exist to address the potential impact of the new rules, but such strategies must be carefully analyzed and implemented to verify compliance. Don’t wait until November to take action. Now is the time to work with your counsel or HR advisor to prepare for the December 1st effective date.