{ Banner Image }

Salary increases for exempt employees will take effect on December 1st. Is your company ready?

November 11, 2016

The long-awaited presidential election is over. Although a new president will be sworn in next year, the amendments to the "white-collar" exemptions are scheduled to take effect less than three weeks from now. Are you ready?

On December 1, 2016, the long anticipated Final Rule increasing the salary level for the “white-collar” exemptions under the Fair Labor Standards Act will come into full force and effect. The minimum salary required for executive, administrative and professional employees to be exempt from federal overtime laws will rise to $47,476 per year ($913 per week). Most employees who do not receive this minimum guaranteed salary will be entitled to overtime pay – regardless of their job duties. The U.S. Department of Labor has promised active enforcement of this heightened salary requirement.
  
The Final Rule includes the following changes: 

  1. The standard salary level is increasing to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, which results in an increase from the current annual salary of $23,660 to $47,476 for a full-year worker (or $913 per week); 
  2. Employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level, if such bonuses or incentive payments are paid on a quarterly or more frequent basis; 
  3. The total annual compensation requirement for highly compensated employees is increasing to the annual equivalent of the 90th percentile of full-time salaried workers nationally (or $134,004 per year); and 
  4. These salary and compensation levels will automatically update every three years, with the first automatic increase on January 1, 2020.

For more information on these changes, see Honigman’s prior blog posts.
 
Now that the effective date of these changes is right around the corner, there is no more time to delay. Employers who have not already taken action must do so immediately. Possible changes facing employers could include increasing salaries to maintain exempt status, reclassifying employees as nonexempt, adjusting work schedules to reduce overtime exposure, or hiring more employees. Additional steps may also be necessary, such as reworking bonus structures and developing policies to track newly nonexempt employees’ working time. For more information or guidance on coming into full compliance by December 1, 2016, please contact one of Honigman’s Labor and Employment attorneys.