May 19, 2016: The U.S. Department of Labor has announced its regulations for the salary level of employees considered “exempt” from the overtime regulations. Previously, a salaried employee could be considered exempt under the regulations as long as the employee fit one of the exemptions (such as executive, administrative, professional, or outside salesperson) and had a weekly salary of at least $455 ($23,660 annually). Effective December 1, 2016, the salary level will be increased to $913 per week/$47,476 per year. Employees who receive salaries less than that amount will no longer be considered exempt.
The new regulations also increase the salary level for “highly compensated employees” (“HCEs”). Currently at a salary level of $100,000 annually, HCEs must be compensated at the minimum salary level of $134,000 effective December 1, 2016. The analysis of an HCE’s duties is subject to a “streamlined test” (meaning the actual duties performed are less scrutinized than for non-HCEs).
The regulations allow nondiscretionary quarterly bonuses and incentive payments to satisfy up to 10% of the new salary test for non-HCEs. Employers may include commissions, nondiscretionary bonuses and deferred compensation for up to two-thirds of an HCE’s compensation.
The salary requirements will be adjusted every three years beginning January 1, 2020 based on an analysis of salaries being paid nationally.
Employers are advised to analyze their salaried employees’ salaries carefully if they want to preserve the employees’ status as exempt employees (not subject to overtime payments after 40 hours in a workweek).
Please consult Don Smith at email@example.com for additional information and specific advice.
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