The Department of Labor’s Wage and Hour Division recently released some Q&As about the new federal overtime rule, which goes into effect on December 1, 2016.
Under the final rule, the standard salary level used to determine whether executive, administrative, and professional (EAP) employees are eligible to receive overtime will increase from $455 per week ($23,660 per year) to $913 per week ($47,476 per year) for a full-time worker.
As you know, employers are unique and have questions about what the impact may be on their industries and businesses. Here are some highlights from the Q&As:
|Are agricultural workers affected?||They aren’t affected by the final rule, unless they qualify for one of the “white collar” exemptions.|
|Are blue collar workers affected?||Workers like mechanics won’t qualify for exempt status because they do not pass the duties requirements for exemption, so they are entitled to overtime pay unless another exemption applies.|
|What about commissioned employees working at a retail establishment?||There has been no change to the exemption for commissioned employees working at a retail establishment.|
|How are computer professionals affected?||The hourly salary for a computer professional to be exempt from overtime is still $27.63. However, the weekly standard salary amount will increase from $455 to at least $913 per week on December 1.|
|Motor carriers||Drivers, drivers’ helpers, loaders who are responsible for proper loading, and mechanics working directly on motor vehicles, which are to be used in transportation of passengers or property in interstate commerce, may be exempt from the overtime rule.|
|Outside sales employees||The old and new salary requirements do not apply to outside sales employees.|
|What about part-time workers?||The standard salary level to qualify for exemption is $913 per week on December 1. whether a worker is full-time or part-time.|
|Are employees with J-1 visas included?||The new rule applies to foreign nationals in the U.S. with J-1 visa status such as alien physicians and research scholars.|
|What about a seasonal business that is only open, say, eight months a year?||During the eight-month period, the employer would need to guarantee that at least $913 per week is paid to an employee exempt from receiving overtime. The employer needs to be concerned with the $913 weekly threshold, not the $47,476 annual threshold.|
|What’s the difference between discretionary and non-discretionary bonuses — and how are they affected by the new rule?||The final rule allows employers for the first time to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level. Non-discretionary bonuses and incentive payments are forms of compensation promised to employees, for example, to induce them to work more efficiently or to remain with the company.|
By contrast, discretionary bonuses (may not be used to satisfy up to 10% of the standard salary level test) are those for which the decision to award the bonus and the amount is at the employer’s sole discretion and not in accordance with any pre-announced standards. An unannounced holiday bonus is a discretionary bonus, because the bonus is entirely at the discretion of the employer, and therefore may not satisfy any portion of the $913 standard salary level. A non-discretionary bonus applies to the quarter it is paid rather than the period it relates to. An employer may make one final catch-up payment sufficient to achieve the required level no later than the next pay period after the end of the quarter.
|What are some ways that an employer can comply with the new overtime rule?||Employers have a range of options. For each affected employee newly entitled to overtime, they may:|
|Can free housing be used to meet the minimum salary threshold?||For executive, administrative, and professional employees to qualify for exemption from overtime, an employee must earn the minimum salary amount “exclusive of board, lodging, or other facilities.” The phrase “exclusive of board, lodging, or other facilities” means “free and clear” or independent of any claimed credit for non-cash items of value that an employer may provide to an employee.|
|The rules are different in my state. What should my business do?||The federal Fair Labor Standards (FLSA) doesn’t prevent a state from establishing more protective standards. If a state has a more protective standard than the FLSA, the higher standard applies there. To the extent the new minimum salary amount of $913 per week under the final rule is higher than the state requirement, the employer in that state must comply with the higher standard and pay not less than $913 per week to an exempt white collar employee.|
|Are comp time programs still allowed? Meaning that any hours over 40 can be banked to use later to either take time off or maybe get paid at end of year at straight time?||Only employers that are public agencies under the FLSA (for example, a state government) can provide comp time in lieu of overtime premium payments.|
|Do teachers fall under the new rule?||Special rules apply to teachers. Here’s some guidance.|
|What are the penalties for non-compliance of the new overtime rule?||Under the FLSA, employers in violation of the law may be responsible for paying any back wages owed to their employees, as well as additional amounts in liquidated damages, civil money penalties, and/or attorney fees.|
These questions only cover some of the provisions of the new overtime rule. Time is running out for employers to understand what will be expected as of December 1. For more information in your situation, contact your payroll advisor.