The Department of Labor issued a new rule updating the overtime pay requirements. The change is effective December 1, 2016. Under the current rules, if an employee meets the following requirements they are exempt from the overtime pay requirements:
- The employee is an executive, administrative, professional, or outside sales employee
- The employee is salaried
- The employee is paid at least $455 per week ($23,660 annually)
The new rule increases the threshold from $455 per week to $913 per week ($47,476 annually). This rate will automatically update every three years based on wage growth. The rule allows for up to 10% of the salary amount towards the exemption threshold to be met by non-discretionary bonuses, incentive pay or commissions. Those amounts must be paid at least quarterly.
What employees does the law effect:
- Employees of organizations that have annual gross business sales of $500,000 or more.
- Employees whose work regularly involves interstate commerce. This would include activities such as making out of state phone calls, receiving sending interstate mail or emails, ordering and receiving goods from out of state, or bookkeeping for such activities. Employees that on isolated occasions spend insubstantial time on such work are still exempt.
Many non-profit employees will still be exempt as the $500,000 threshold is only for activities with a business purpose and does not include:
- Income from activities that are charitable in nature, where such activities are not in substantial competition with other businesses
- Income for the furtherance of charitable activities including: Donations, Membership fees, or Dues (except for any portion for which the payer receives a benefit of more than token value in return)
Starting December 1, 2016, to comply with the law employers with employees subject to the overtime laws will need to either:
- Raise salaries to meet the new exemption amount $913/week
- Pay current workers overtime after 40 hours for employees not meeting the exemption
- Limit workers to 40 hours per week
- Combination of the above