Yesterday, the federal Department of Labor finally announced the issuance of a final regulation on the “white collar” overtime exemptions, raising the minimum required salary from approximately $23,400/year to $35,568/year (or $684/week). For employees exempt under the “highly compensated” exemption, the minimum total annual compensation increases from $100k/year to $107,432/year (and the minimum salary increases as with the other exempt employees). The new rule also permits employers to satisfy up to 10% of the minimum salary from nondiscretionary bonuses, incentive pay and commissions that are paid at least annually. The new rule will take effect on January 1, giving employers three months to adjust their payrolls and examine whether to continue the exempt status of certain employees, or convert them to non-exempt status. The new regulation replaces the Obama-era regulation that was to take effect on December 1, 2016 before it was stayed by a federal court and which had included annual increases in a higher minimum salary.
The salary basis test has been amended to include a variation of the Obama-era regulation provision permitting the 10% credit for non-discretionary bonuses, incentive compensation and commissions towards the minimum salary in §541.602(a)(3):
Up to ten percent of the salary amount required by § 541.600(a) may be satisfied by the payment of nondiscretionary bonuses, incentives and commissions, that are paid annually or more frequently. The employer may utilize any 52-week period as the year, such as a calendar year, a fiscal year, or an anniversary of hire year. If the employer does not identify some other year period in advance, the calendar year will apply. This provision does not apply to highly compensated employees under § 541.601.
The Obama-era rule required the variable compensation to be paid quarterly, instead of annually, but still only permitted a 10% credit.
The regulation also almost doubles the minimum exempt salary for exempt employees in the motion picture industry, from $695/week to $1,043/week.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
