Work it Out Blog

Final Overtime Rule Changes Requirements for Classifying Employees as Exempt

May 23, 2016 by Jill C. McQueen

On May 18, 2016, the Department of Labor announced the publication of its long-anticipated overtime regulations. The new rules are expected to affect more than 4 million Americans currently classified as exempt from the requirement of overtime pay for hours worked in excess of 40 per week. The new rule will take effect December 1, 2016.

What Has Changed?

Prior to the change, salaried employees in white collar jobs could be classified as overtime-exempt if they met certain duties tests and were paid at least $23,660 per year. With the new rules, that salary threshold increases to $47,476 annually.  A separate exemption for “highly compensated employees” (HCEs) will now require a minimum salary of $134,004, up from $100,000.

These minimum compensation levels will automatically increase every three years, beginning in 2020, so that the salaries necessary to maintain exempt status remain at a fixed percentile of earnings for full-time salaried workers: the 90th percentile for HCEs and the 40th percentile for workers qualifying under other white collar exemptions.

What Does This Mean for Employers?

Employers of any employee earning less than $47,476 per year will no longer be permitted to treat these individuals as exempt from the overtime requirement. If these employees continue to work more than 40 hours in a workweek, they will be entitled to time-and-a-half premium pay.

This does not mean, of course, that workers should necessarily count on an increase in pay, since other options are available for employers. For example, individuals earning less than $47,476 annually may be converted to non-exempt status, and paid an hourly rate that corresponds to the wages they earned prior to the rule change. 

With more employees entitled to overtime pay, employers may well seek to limit—or eliminate altogether—overtime hours for those who no longer qualify for the exemption based on their level of pay. Some employers are expected to look increasingly to part-time workers to fill their staffing needs.

Day Ketterer’s employment attorneys can answer your questions about the new overtime rule. Contact us at 330-455-0173 or email info@dayketterer.com.

The content of this blog is for informational purposes only and is not intended as legal advice for any purpose. This blog is not intended to present an exhaustive summary of all applicable laws, or to take the place of legal advice.  If you have any questions regarding the law, please contact us for assistance.