On May 18, 2016, the Obama administration announced new overtime requirements that may affect more than 4 million workers in the United States. According to the new U.S. Department of Labor (DOL) rules, which amend the Fair Labor Standards Act, salaried employees who are paid less than $47,476 per year must be paid overtime – even managers and others in supervisory roles.
Effective December 1, 2016, the new threshold is roughly double the previous amount of $23,660 and may have broad implications for employers across a wide range of industries, including healthcare, advertising, media, manufacturing, hospitality and retail. Under the guidelines, employees making less than $47,476 per year–or $913 per week–must be paid overtime wages if they work more than 40 hours per week.
In addition, the New Rules:
- Set the minimum salary required to qualify for overtime exemption at the 40th percentile of weekly earnings for full-time salaried workers in the country’s lowest-wage census region (currently the South).
- Increase the total annual compensation requirement to exempt highly compensated employees (HCEs) from $100,000 to $134,004 (the annualized value of the 90th percentile of earnings of full-time, salaried workers nationally).
- Automatically update the minimum salary and compensation levels regarding exemption every three years, beginning Jan. 1, 2020. The DOL estimates the first update to the salary threshold will be $984 per week or $51,168 annually.
- Allow – for the first time –nondiscretionary bonuses, incentives, and commissions to count toward up to 10 percent of the required salary level. To qualify, employers must make these payments on a quarterly or more frequent basis.