What Employers Need to Know About the Proposed New Overtime Rules

August 6, 2015

The U.S. Department of Labor (DOL) announced proposed adjustments to the federal overtime rules. Currently, and with few exceptions, to be exempt from the payment of overtime, an employee must:

  • be paid at least $23,600 per year ($455 per week),
  • be paid on a salary basis, and
  • perform exempt job duties.

These are requirements of the Fair Labor Standards Act and most employees must meet all three "tests" to be exempt.

The DOL is proposing an increase to the minimum salary requirement to raise it from $23,600 to $50,440. This would mean that employees compensated below $50,440 per year would need to be paid overtime for all hours worked more than 40 in a workweek, regardless of the job duties performed.

The last increase in the minimum salary requirement was in 2004. It is anticipated that the implementation date will be sometime in 2016.

Additionally, the DOL is seeking public feedback on whether modifications to the duties tests should be included in the new rules. There are typically three categories of exempt job duties: "executive," "professional" and "administrative."

Job duties are exempt executive job duties if the employee:

  • regularly supervises two or more other employees
  • has management as the primary duty of the position, and also
  • has some genuine input into the job status of other employees (such as hiring, firing, promotions or assignments).

Learned professionals, such as lawyers, doctors, dentists, teachers, architects, clergy, accountants, engineers, scientists and pharmacists are usually exempt.

Job duties of administrative professionals are exempt if the employee:

  • performs office or nonmanual work, which is
    • directly related to management or general business operations of the employer or the employer's customers, and
    • primarily involves the exercise of independent judgment and discretion about matters of significance.

It is often challenging for employers to appropriately categorize employees as exempt or non-exempt based on these duties tests. Therefore, the DOL is seeking public feedback and employers are encouraged to submit comments during the review period. The comment period ends September 4, 2015. Information on how to submit public comments can be found in the proposed regulations or on the Department of Labor website.