The U.S. Department of Labor yesterday released long-awaited final overtime pay qualification rules.
Key components of these new rules, under the Fair Labor Standards Act’s “white collar” exemptions, provide updated clarification for two of the three tests employers must apply when determining workers’ exemptions from overtime. An employee’s job must meet all three tests to be exempted from minimum wage or overtime pay.
Highlights of the DOL’s final rules include:
- Clarification and updates are offered for two of the three “white collar” exemptions tests for analyzing the qualification for classifying jobs as “exempt” or “non-exempt” from overtime pay. These tests include the Salary Basis Test, which looks at whether the employee is paid a predetermined and fixed salary not subject to variations; the Salary Level Test, which looks at a salary threshold as an objective way to determine overtime exemption; and the Duties Test, which assesses whether an employee’s job duties correspond to the exemptions permitted under executive, administrative or professional categories. The Duties Test remains, but is unchanged, in this latest final rule.
- For the first time, non-discretionary bonuses and incentive payments may be used to satisfy up to 10 percent of the employee’s standard salary level.
- The base minimum salary level for exemption is increased to $913 per week from the prior rate of $455 per week, representing the 40th percentile of the lowest wage census region in the United States (South). The minimum salary for the highly compensated employees is increased to $134,000 per year from the current $100,000 per year, representing the 90th percentile of full-time workers earnings in the United States.
- The new rules also provide for an update every three years to match the respective 40thand 90th percentiles with the first update expected Jan. 1, 2020. The DOL will post rates at least 150 days prior to the effective dates via the Federal Register and on the DOL web site.
Employers will have until Dec. 1 to comply with the new rules. The official rules will be published in the Federal Register May 23; click here for a preview copy.