The U.S. Department of Labor today issued its long-awaited final regulations confirming the proposed changes to the Fair Labor Standards Act overtime pay exemptions. The salary level that is required as part of the test for an employee to be classified as exempt has been $455 per week for many years. The new regulations increase this level to $913 per week. The change on an annual basis is from $23,660 to $47,476. The new salary level goes into effect on December 1, 2016.
Under the new regulations, employees with a salary of less than $913 per week must be paid time and one-half for all hours over 40 per week. In order to keep an employee who is currently earning less than $47,476 annually in the exempt category, you will need to raise the employee’s salary to at least that level. Alternatively, employers can reclassify the employee as nonexempt and maintain the employee at a salary of less than $47,476 annually, but require the employee to record work hours and pay the overtime level for hours in excess of 40 per week. The employee can also be reclassified as hourly nonexempt, with the requirement for overtime pay.
Employers are now faced with some difficult decisions in the wake of the new regulations. If employees who are currently salaried are reclassified as hourly, they potentially will view the change as a loss of status or demotion, even though their compensation might actually increase if they work overtime. Employers will need to examine all positions with a salary of less than $47,476 and decide what changes are needed.