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NEW DOL RULES ON OVERTIME GO INTO EFFECT DECEMBER 1, 2016

ARE YOU PREPARED?

As promised back in June of 2015, the Department of Labor (“DOL”) has issued its revised regulation impacting the Fair Labor Standard Act’s (“FLSA”) “white collar” exemption tests for executive, administrative and professional employees.  This week the DOL announced that the Final Rule will go into effect starting December 1, 2016. 

Determining whether an employee properly falls into an exempt category requires the examination of two components: (1) whether the salary paid meets the requisite salary-basis test, and (2) whether the employee falls into a recognized exemption category based on the employee’s primary job duties.  The new Final Rule only impacts the salary-basis test.  

Under the old rule, the employee had to earn at least $455 per week (or $23,660 annually) to qualify as an exempt employee for overtime purposes.  The new Final Rule will more than double that minimum threshold to $913 per week (or $47,476 annually).  Under the new Final Rule the minimum threshold amount will be reviewed (and presumably increased) every three years.  The new Final Rule also increases the threshold salary requirement for the Highly Compensated Employee exemption from $100,000 annually to $134,004.   

This rule change presents an excellent opportunity for employers to review their present pay policies, review job descriptions and reexamine employee classifications to ensure compliance – particularly as some state and local wage and hour statutes, such as Maryland and the District of Columbia, carry heightened damages provisions for lawsuits brought by employees.  While the new Final Rule only impacts the salary-basis test, it provides employers an opportunity to change employees’ exempt/non-exempt classifications while avoiding the red flags that are usually raised when an employer attempts to reclassify an employee for overtime payment purposes.  So, if you are worried that you might have misclassified based on the duties test, now is the time to act!

The contents of this Alert are for informational purposes only, and do not constitute legal advice. If you have any questions about this Alert, please contact a member of the Shulman Rogers Employment and Labor Law Group or the Shulman Rogers attorney with whom you regularly work.