The U.S. Department of Labor will issue new regulations today that will have a big impact on many employers. In a nutshell, as of December 1, 2016, if your exempt employees are not earning a salary of at least $47,476 per year, they can no longer be deemed exempt, and must be paid overtime if they work more than 40 hours in a workweek. This change is estimated to impact millions of employees across the nation, and in North Carolina, over 150,000 employees.
In general, in order for employees to be deemed exempt from overtime regulations, they must (1) pass a test demonstrating that they primarily perform executive, administrative, or professional duties and (2) meet a salary threshold. The new regulations do not change the “duties” test, but essentially double the salary threshold to $47,476 per year, which was previously set at $23,660. This means that even if your employee primarily performs executive, administrative or professional duties, and even if that employee has previously been deemed exempt from overtime, beginning December 1 the employee will not be exempt unless he or she receives an annual salary of at least $47,476 per year. If that salary threshold is not met, the employee must be paid for overtime. The regulations will allow employers to count certain bonuses and commissions toward as much as 10 percent of the salary threshold.
As December 1 approaches, employers will have to give serious thought to how they will address this change, with options including increasing salaries to the new threshold; paying previously exempt employees overtime for hours worked in excess of 40 in a workweek; or reducing overtime hours.
The regulations allow for updates to the salary threshold every three years, and based on current projections of wage growth, the threshold is expected to rise to more than $51,000 with the first update on January 1, 2020.
As noted above, the actual regulations will be released later today, and we anticipate at some point further details will be available via technical guidance from the Department of Labor. In the meantime, if you have any questions regarding the new regulations, please do not hesitate to contact us. — Lori P. Jones