New Overtime Exemption Rules


overtime-imageAs expected, the United States Department of Labor has made changes to the salary threshold used to determine if an employee is exempt from overtime. 

Summary of all changes

Previously the minimum threshold was $455 per week. This minimum has jumped to $913 per week or $47,476 per year. There were other proposed rule changes discussed but there were no other major changes except for a mechanism to review salary thresholds every three years.

 

Exempt vs Non-Exempt

Salary Test

Now is a good time to review any employees with a salary lower than $913 per week. If you have employees making less, make sure that you require them to track hours and that overtime is paid. You can still have someone making a salary less than $913 per week as long as they are paid at or above minimum wage; just pay them at an hourly overtime rate for any work over 40 hours per week.

 

Duties Test

As noted earlier, there were no other rule changes for overtime exemption besides compensation. That said, while you are reviewing salaries you will want to take this opportunity to review employees based on the Duties Test.

The Fair Labor Standards Act (FSLA) duty rules on being exempt from overtime are not straight forward. If you made an exempt determination on an employee years ago and the employee’s duties have changed over time now would be a good time to review their classification.

 

Making the Change

Best practice is to put a change of exemption in writing. You may use the suggested language below and modify it for your own use. Note that the specific reason for the change from salary to hourly is ambiguous which may be necessary should concerns come up upon review of the Duties Test.

“As you may know, the United States Department of Labor has made rule changes to the Fair Labor Standards Act regarding exemptions from overtime. The changes to these rules go into effect on December 1, 2016. Upon review of your position we have reclassified you as an hourly employee effective __/__/__. You will need to begin tracking and reporting your hours to your supervisor. If you have any questions please contact _____.”

 

Where to get Help

If you need help with making exempt employee determinations under the FSLA, Cardinal Services offers a free FSLA analysis.

 

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