U.S. Department of Labor Publishes New Overtime Rule

Written by Daniel W. Morris

The United States Department of Labor issued its long-awaited rule increasing the minimum salary for overtime eligibility. Effective December 1, 2016, the minimum salary threshold for most of the white-collar overtime exemptions will increase to $47,476 per year ($913 per week).

The rule also contains a provision that is designed to automatically increase the minimum salary level every three years, based on measured wage growth within the United States. The rule does not make any changes to the duties tests that determines whether white collar employees are exempt from overtime.

Employers that have employees that are currently exempt but do not meet the new salary threshold have a limited number of options for their affected employees:

  • pay time-and-one-half for overtime work
  • raise the employees’ salary to the threshold
  • limit the employees’ hours to 40 per week
  • some combination of the above

Employers will have to weigh the impact of each of the various options to reach the appropriate decision. The rule provides some new flexibility: it will allow up to 10% of the salary threshold to be met by non-discretionary bonuses, incentive pay, or commissions, as long as the payments are made on at least a quarterly basis. In addition to the increase to the minimum salary for most white-collar exemptions, the new rule also increases the minimum salary for the Highly Compensated Employee exemption. That exemption sees its minimum salary increase from $100,000 per year to $134,004 per year. Like the white-collar salary threshold, the Highly Compensated Employee threshold is designed to increase every three years.

About the Author
Daniel W. Morris
Partner
Daniel W. Morris serves as Partner at Clifton Budd & DeMaria, LLP. He focuses his practice on employment litigation in...
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