12/01/16: This Rule is currently on hold, per court order. Please read the latest article for news updates on this topic.
On May 23, 2016, the Department of Labor announced a new, final rule that will take effect on December 1, 2016. To the relief of employers, the new rule does not make any changes to the criteria for classifying employees as exempt. Employers can continue to classify employees as exempt or non-exempt under the same duties tests and criteria they used in the past. However, the principal change comes in the form of several heightened minimum salary requirements.
Under the new rule, the minimum annual salary for exempt employees will more than double, from $23,660 ($455 per week) to $47,476 ($921 a week). The minimum annual salary for highly compensated employees will also increase from $100,000 to $134,004. Furthermore, these minimums will continue to automatically increase every three years.
In a new addition to the rule, employers will now be permitted to satisfy up to 10 percent of the annual salary level through non-discretionary bonus and incentive payments, including commissions. Payments to health insurance policies, however, may not be used to satisfy the salary requirement.
Employers should keep in mind that employees must satisfy both the duties requirements as well as the minimum salary requirements to be classified as exempt. If an employee meets one but not the other, then he or she may not be classified as exempt.
December 1 is right around the corner. Employers should review their payroll records now to ensure they make any necessary salary increases or employee re-classifications come December. Failure to comply may open employers up to investigation by the Department of Labor, or may place employers at risk for liability in private or class action litigation.
For more information on the new rule, helpful fact sheets, and guidance on how to move forward in the wake of these changes, click here.
Will You Need to Re-Classify Your Employees, or Increase Their Salaries?
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To learn more about ensuring your business is compliant with state and local laws, schedule a complimentary 15-minute consultation with The Grady Firm’s attorneys; call +1 (323) 450-9010; or fill out a Contact Request Form.
*This article is for informational purposes only, and does not constitute legal advice or create an attorney-client relationship. This article does not make any guarantees as to the outcome of a particular matter, as each matter has its own set of circumstances and must be evaluated individually by a licensed attorney.