The moment employers have anxiously anticipated for months is here. This morning (May 18, 2016), President Obama and United States Department of Labor (DOL) Secretary Tom Perez announced the publication of the DOL’s long-awaited revised federal overtime regulations. The DOL has highlighted the following key aspects of the revised regulations:
- The standard salary level for the Executive, Administrative, and Professional exemptions will increase from $23,660 to $47,476 per year. While this new level is lower than the originally anticipated $50,440, the increase nonetheless effectively doubles the previous salary threshold and will have a significant impact on employers’ exempt workforces. Indeed, the DOL estimates that the new salary level will make 4.2 million employees newly eligible for overtime pay.
- Employers will be able to satisfy up to 10% of the standard salary level through nondiscretionary bonuses and incentive payments including commissions, as long as such payments are made in accordance with the new regulations. Many employers have commissioned workforces and this provision could help them to cushion, albeit minimally, the impact of the increased salary level.
- The total annual compensation required for an employee to be considered exempt as a Highly Compensated Employee, will increase from $100,000 to $134,004.
- The revised regulations also contain a mechanism by which these salary and compensation levels will automatically update every three years beginning on January 1, 2020.
- Although many sources had anticipated that employers would be provided with only a 60 or 90-day compliance period, the effective date is not until December 1, 2016. This effective date provides employers with significantly more time than originally expected to bring their pay practices into compliance.
Given these changes, employers have approximately six months to analyze their exempt workforces and determine how best to comply with the new revisions. Initial guidance for employers from the DOL is available here. This will undoubtedly be a labor-intensive process that will require significant changes for many employers. We at BRR look forward to working with you on these issues in the coming months.