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DOL Issues New Salary Requirements for Overtime Pay Eligibility

Yesterday evening, May 17, word began to leak that the Department of Labor (DOL) would be releasing its long-anticipated changes to the wage and hour regulations this morning. Sure enough, just a few hours ago, the DOL released its final rule amending the salary requirements for employees eligible for overtime pay. The regulations, sure to be contested in Court by various pro-business groups, increase the current salary requirement of $23,660 annually (or $455 per week) for those falling under the administrative, professional or executive exemption to $47,476 annually (or $913 per week). For those employees falling under the highly compensated employee exemption from overtime, employers will now need to meet the salary threshold of $134,004 annually, which is an increase from the current $100,000 level.

While we have not seen any changes in the salary threshold since 2004 when it was increased to $23,660, the DOL has put measures in place for an automatic increase – a first for this regulation. In this final regulation, the salary threshold can increase every three years if the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region increase. Currently, this Region is the Southeastern United States. Also for the first time, employers will be able to use nondiscretionary bonuses and incentive payments, commissions included, to satisfy up to a cap of 10 percent of the salary threshold.

The DOL did appear to give a few small victories to employers and pro-business groups. Significantly, there were no changes to the duties test. This was feared by many when the proposed regulations requested comments on the effectiveness of the duties tests, but ultimately, they remain unchanged. Additionally, we were concerned about a short window for compliance. Instead, the DOL has given employers until December 1, 2016, the effective date, to come into compliance with the final regulation. This is a much longer period of time than anyone anticipated.

Significant decisions remain for employers prior to the December 1 effective date. Employers should consider reviewing those employees falling at or near the new salary threshold and whether the employees satisfy the applicable duties test. Employers should also consider how to handle employees with smart phones – something that was not of concern in 2004 when the regulations were changed. Finally, employers should consider whether to move employees from salary to hourly and how to effectively communicate such a change to employees.

These and other issues will be discussed at an in-house client seminar Kahn, Dees, Donovan & Kahn, LLP, will host on Tuesday, June 7, 2016, from 8:00 – 10:00 a.m.  While a formal invitation will follow, you can RSVP now to Brandy Gansman at bgansman@KDDK.com or (812) 423-3183 to secure your spot.

For additional information on this or any related topic, please contact Indiana labor and employment law attorney Jake Fulcher at (812) 423-3183 or jfulcher@KDDK.com, or contact any member of the KDDK Labor & Employment Law Practice Team.

About the Author

Jake Fulcher

Jake Fulcher, an Indiana labor and employment law attorney, is a partner at Kahn, Dees, Donovan & Kahn, LLP, in Evansville, Indiana. Jake represents a broad base of employers, including both private and public employers located in the U.S. and abroad, in all aspects of labor and employment law. Jake devotes much of his practice to daily client counseling, developing best practices, and providing management and supervisor training on a variety of labor and employment-related issues. He also reviews and drafts employment contracts, consulting agreements, handbooks, non-compete/trade-secret agreements and severance packages.

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