New White Collar Overtime Rules Announced

New White Collar Overtime…

On May 18, 2016, the United States Department of Labor made official what has long been expected: the minimum salary for employees otherwise ineligible for overtime pay is going to double. Starting December 1, 2016, the threshold salary for overtime exemption will be $913 per week ($47,476 per year).

Under the Fair Labor Standards Act (FLSA), certain categories of so-called “white collar” employees are exempt from overtime pay provided they receive a threshold base salary. Currently, the base salary sits at $23,660 per year. Once the rule change takes effect, salaried workers paid less than the new threshold of $47,476 per year must also receive overtime pay if they work more than 40 hours in a week – regardless of their job title or job duties.

Here are a few important points to keep in mind:

  • Earned bonuses and commission can account for not more than 10% of the base salary. For example, if an employee has a base salary of $40,000 and earns $8,000 in additional commissions in a year, she still falls below the threshold and is entitled to overtime pay. Only $4,474 of the commissions (10% of base) can be added to the $40,000 for threshold calculations, leaving her short.
  • Employees receiving a salary over the threshold still may be eligible for overtime pay if their duties do not place them within one of the exempt categories.
  • The threshold salary level test does not apply to certain professionals including doctors, lawyers, teachers, and outside sales professionals. Even if paid below the threshold, they typically are ineligible for overtime.

Those companies that currently have exempt white collar professionals on payroll earning less than $47,476 per year need to study the impact of the new rule carefully to determine whether changes need to be made in their operations before the rule takes effect on December 1, 2016.

Questions? Call us at 248.477.6300.

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