The United States Department of Labor recently issued a new overtime regulation related to white collar employees. The new regulation changes the requirements of an employee to be considered exempt or nonexempt from time-and-a-half overtime pay.
There are three requirements to being considered exempt from overtime pay (all must be met):
- Salary Level Test- The employee’s pay exceeds the minimum, predetermined amount.
- Salary Basis Test- The employee is paid a predetermined and fixed salary.
- Duties Test- The employee’s job primarily involve administrative, executive, or professional duties.
However, only one of these were drastically changed. The updated Salary Level Test states that employees who are paid more than $913 per week (previously was $455), or $47,476 per year (previously was $23,600) are exempt. The new regulation also requires that these amounts are updated every three years to set the salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. These regulations take effect on December 1, 2016, at which point every employee who does not pass all three of the tests above must be paid overtime.
Businesses should start thinking about if they will have any employees who are currently exempt that will need to start being paid overtime. If you have an employee that will be converted from exempt to nonexempt, you can do one or a combination of the following:
- Pay the employee time-and-a-half for overtime hours.
- Raise the salary of the employee so they exceed the Salary Level Test threshold.
- Limit the employees hours to 40 per week.
The Department of Labor discusses the new overtime regulation in this post, which includes a video that is easy to follow https://www.dol.gov/featured/overtime. If you have any questions related to the new regulation, please give us a call at 616-393-0398.