New Overtime RegulationsBy Jeffrey A. Kimmel and Naomi Dabi Lantsberg
Over the last few weeks, we have received several inquiries regarding the United States Department of Labor’s (DOL) new overtime regulations. The new DOL regulation (the “Regulation”), upon becoming effective on December 1, 2016,1 will mean that employees earning less than $913 per week ($47,500 annually) will be entitled to overtime compensation, regardless of whether they could otherwise be classified as exempt Executive, Administrative, or Professional workers (“white collar”).
The Regulation focuses primarily on updating the compensation levels needed to qualify for Executive, Administrative and Professional exemptions. The Regulation does change other factors involved in the determination of whether an employee is exempt from overtime, namely the requirement that employees perform certain duties to qualify for “white collar” or other exemptions. Specifically, the Regulation:
- Increases the minimum salary threshold for salaried, exempt workers from $455 per week ($23,660 per year) to $913 per week ($47,476 per year)2 ;
- Increases the compensation level for highly compensated employees (who are subject to a less burdensome minimal duties test to determine exemption from overtime pay) from its previous amount of $100,000 to $134,004 annually;
- Establishes a mechanism for automatically updating the salary and compensation levels every three (3) years; and
- Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to ten (10) percent of the new standard salary level.
As a result of this Regulation, employers should review and make any necessary adjustments to the salaries of exempt employees. For example, if an employer has employees being treated as exempt from overtime, and those employees earn $40,000 (but would otherwise qualify for an overtime exemption), an employer will need to either increase such employees’ salaries to meet the new threshold, or, alternatively, track their hours and pay them overtime for all hours worked over forty (40) each workweek.
If you have any questions or would like to discuss the foregoing please contact Jeff Kimmel at (212) 655-3578 or Naomi Lantsberg at (212) 655-3550.
1As of the date of this article, the effective date of the Regulation was December 1, 2016. However, in September 2016, the U.S. House of Representatives voted to delay the effective date of the Regulation by six (6) months, until June 2017.
2In New York, since December 1, 2015, the salary threshold was $675 per week. However, the new DOL regulations, once effective, will pre-empt this lower threshold.