After much anticipation ( and likely some dread from employers) the DOL released its new overtime rules last night. The Final Rule makes changes to the salary test for the Executive, Administrative and Professional (EAP) Exemptions as well as the Highly Compensated Employee Exemption.
* Key Provisions of the Final Rule *
The Final Rule focuses primarily on updating the salary and compensation levels needed for EAP workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
- Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. A “catch up” payment can also be made in an effort to satisfy the new salary level, provided it does not exceed 10 percent of the new minimum salary. However, HCE employees must still receive at least the full standard salary amount each pay period on a salary or fee basis without regard to the payment of nondiscretionary bonuses and incentive payments.
- The Effective Date is December 1, 2016.
Significantly, the Final Rule made no changes to the current duties tests for these exemptions.
Employers have almost 6 months to prepare before these changes become law. Use that time wisely to consult with employment law counsel, audit your employees currently classified as exempt and analyze your business to determine the best way to respond .