President Obama directed the Secretary of Labor to update overtime rules.
The new rule goes into effect on December 1, 2016. The new rule will:
- Raise the salary threshold indicating eligibility from $455/week ($23,660) to $913 ($47,476 per year), ensuring protections to 4.2 million workers.
- Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability.
- Strengthen overtime protections for salaried workers already entitled to overtime.
- Provide greater clarity for workers and employers.
The overtime rules apply to white collar employees unless the white collar employee is exempt. To qualify for an exemption, a white collar generally must:
- be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);
- be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) under this Final Rule (the “salary level test”); and
- primarily perform executive, administrative, or professional duties, as defined in the Department’s regulations (the “duties test”).
Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers). The Department of Labor’s regulations also provide an exemption for certain highly compensated employees who earn above a higher total annual compensation level ($134,004 under this Final Rule) and satisfy a minimal duties test.