New Exempt Employee Salary Requirements Might Affect Your Practice

Molly Pereira Featured News

The U.S. Department of Labor (DOL) published a new rule that changes the salary and compensation levels needed for executive, administrative and professional staff to be considered exempt from overtime pay. The rule, which goes into effect Dec. 1, 2016, carries steep penalties for those who don’t comply. Is your practice affected?

The rule sets the standard salary level for exempt employees at $913 a week, or $47,476 a year. It also sets the total annual compensation for highly compensated employees (HCE) subject to the minimal duties test at $134,004. The rule allows employers to use nondiscretionary bonuses, incentives and commissions to satisfy up to 10 percent of the standard salary level of $47,476.

Who Is Exempt?

Determining if an employee is exempt from the Fair Labor Standards Act’s (FLSA’s) minimum wage and overtime requirements is a three-step process. All three criteria must be satisfied for the position to be exempt from FLSA.

  1. The position must be paid on a salary basis and not subject to reductions due to quality or quantity of work performed (salary basis test).
  2. The position must meet the minimum salary requirement of $913/per week or $47,476/annually.
  3. The primary duties of the position must involve the work of an exempt executive, administrative or professional employee (the standard duties test).

The DOL has developed compliance materials for employers to assist in understanding and implementing the new law.