Increasing a Salary Threshold for White Collar Overtime Exemptions
On June 30, 2015, the United States Department of Labor (DOL) proposed to review the rule of overtime exemptions for office workers and make it a federal law. The federal Fair Labor Standards Act usually requires that “white-collars” get an overtime pay of 1 or 1.5 times their regular pay rate for more than 40 hours of work per week.
Nevertheless, there can be several exclusions. Due to FLSA regulations, those employees, who earn approximately $455 or more per week (at least 23.660 per year) and manage to handle a so-called duties test, which lies in performing certain executive, professional or administrative duties and do not get the overtime pay, despite having a quality professional resume written. For highly compensated employees, who earn more than $ 100.000 per year, can do a relaxed duties test.
Why Is It Important?
A rule of restricting these overtime exemptions by doubling the number of salary thresholds was offered by DOL. They have determined that the minimum salary to apply for administrative, executive, or professional overtime exemptions should equal at least $970 per week, respectively $50.440 per year. In order to apply for highly compensated exemptions, employees have to earn at least $122.148 per year.
The Department of Labor offers to control these thresholds according to either inflation or the 40th percentile (90th for highly compensated office workers) of full-time employees’ weekly paychecks.
Accordingly, as the DOL has calculated, this current update to the rule can dramatically extend the overtime payments up to 5 million white-collars, who couldn’t receive those privileges before, despite. B
Besides, all of the affected employees will end up with more than 1.27 billion of additional income, required annually.
In fact, the DOL didn’t offer any changes in duties test along with the increases in salary floors. However, this doesn’t mean the tests are working the way they should, which means tests might be altered by the Department of Labor, if necessary.
Together with the duties test’s issues, there’re also comments on nondiscretionary bonuses – in other words, bonuses, set up at the beginning of a payment period in order to meet special criteria (production goals or work performance).
The DOL has insisted on providing those bonuses to figure out whether an employee meets a salary threshold for any type of overtime exemptions.
The final version of a rule will be released after a 60-day comment period. Employers have to be attentive to watch for the final decision of the DOL. Most likely, the rule will become valid in 2016.
When the rule is in force, employers will need to prepare to make some changer in their human resource and payroll practices. Those white collars, who have been exempted, must be turned into a non-exempt status or their salaries can be increased in order to meet new thresholds for overtime exemptions.
Therefore, some specialists have to upgrade existing CVs. Besides, in California employers are required to provide meals and breaks along with overtime payments to people, who were converted into non-exempt status.
Moreover, due to state and federal laws, employers have to record worked hours, time of meals, intervals between shifts, and other payments of their non-exempt employees.