New Overtime Rule Finalized Today

Craig Carter

As has been widely reported, the Department of Labor issued its final overtime rule today raising the salary level requirement for most “white collar” exemptions, as well as for the “highly compensated employee” exemption.  Here is the link to the DOL Factsheet on the new rule: https://www.dol.gov/whd/overtime/final2016/overtime-factsheet.htm  This has been in the works a long time and should be no surprise to anyone.  A few of the items that we did learn today are that the new rule will not go into effect until December 1, 2016 and the new standard salary level is confirmed to be $913 per week/$47,476 annually ($134,004 for the highly compensated employee exception).  This means that, beginning December 1, 2016, employees earning a salary of less than $47,476 per year will not be exempt for overtime purposes.  These new salary levels will now be updated every three years. 

Although the new rule will allow employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the new standard salary level, “salary” for the purposes of the overtime rule does not include discretionary bonuses, payments for medical, disability, or life insurance, or contributions to retirement plans or other fringe benefits.  Thus, these common employee benefits cannot be used to satisfy the $47,476 per year salary requirement.  One other very basic but important point to remember is, regardless of an employee’s salary level, if the employee never works over 40 hours in a week, the employee is not owed overtime pay.