Effective on December 1, 2016, President Obama and Secretary Perez announced on May 18th, 2016, the publication of the Department of Labor’s final rule regarding
the update of overtime regulations, extending overtime pay protections
to more than four million workers within the first year of being implemented.
The key provisions of the final rule include:
Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage
Census region, currently the South ($913 per week; $47,476 annually)
Sets the total annual compensation requirement for highly compensated employees
(HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004)
- Establishes a mechanism for automatically updating the salary and compensation
levels every three years to maintain the levels at the above percentiles
and to ensure that they continue to provide useful and effective tests
- Amends the salary basis test to allow employers to use nondiscretionary
bonuses and incentive payments (such as commissions) to satisfy a maximum
10% of the new standard salary level
Currently, only salaried workers who make less than $23,600 are eligible
for overtime pay. With the new policy, the threshold raises to $47,476,
which affect around 4.2 million individuals. Further inflation adjustments
will be made every three years thereafter using the same 40th percentile criteria.
However, lower-wage businesses and service industries, including retail
and hospitality, are against this new rule. According to the National
Retail Federation, instead of salary increases to raise workers above
the overtime threshold, the NRF suggest that businesses will reclassify
professionals as hourly workers, which disqualify them from specific benefits,
existing perks, and flexibility. Michael Rounds, a Kansas University official,
testified before a congressional committee on Thursday (June 9th, 2016), the new ruling will be “detrimental” to higher education,
as far as reclassification of employees, reduction of services, and the
possible increase of tuition.
To see how you are affected by this new ruling,
contact the Marder Employment Law and schedule a
free consultation with our Northern California employment attorney today.