Yesterday, the Obama administration released its final rule on overtime payments, more than doubling the minimum salary threshold for the federal overtime requirement exemption (commonly referred to as the “white collar” exemption).
In order for salaried management, administrative, and professional employees to be exempt from receiving overtime pay when they put in more than 40 hours a week, they must make more than $47,476 in 2016, under the rule. The same duties test applies as before the new rule. The previous minimum was $23,660.
All currently exempt employees making an annual salary above $23,660 but less than $47,476 will either have to be reclassified as hourly workers and paid for all hours worked over 40 in a week, be limited to a 40-hour week, or receive a pay raise that puts them above the $47,476 minimum. Another option is to split the job into two part-time positions.
The new rule also raises the salary level for the highly compensated employee exemption from $100,000 to $134,004 annually.
Employers must implement the new rule by Dec. 1.
The threshold will be adjusted every three years rather than annually as initially proposed. Any automatic increase will be indexed to salary growth in the lowest income region of the country, which is currently the South. For the first time, bonuses and incentive payments count toward up to 10 percent of the new salary level.
CLICK HERE to read an overview of New Rules