How to Comply with the New White Collar Overtime Exemption Regulation

The United States Department of Labor recently announced a new rule on white collar overtime exemption regulations. This new rule will affect an estimated 4.2 million white collar workers who will no longer be exempt from Fair Standards Labor Act guidelines and must be paid for overtime work. The new rule will go into effect on December 1, 2016. The employment lawyers at Structure Law Group, LLP are experienced in ensuring that their clients follow all federal and California employment rules and regulations.

Old Rule vs. New RuleFotolia_107679428_Subscription_Monthly_M-300x300

Previously, qualifying employees with an annual salary of more than $23,660 (or $455 per week) were generally exempt from the federal requirement that employees are entitled to overtime if they work over forty hours in one week. Under the new law, the minimum salary threshold for exemption has been raised to $47,476 annually, or $913 per week. This amount will be automatically revised every three years by a formula that takes into account wages across the country.

The Standard Duties Tests

Employees paid below this threshold amount will be generally entitled to overtime pay once the law goes into effect. However, receiving a threshold salary amount does not mean that an employee is exempt from overtime and minimum wage protections. The employee’s job responsibilities must also meet the one of the three standard duties test:

  • Under the executive exception, the employee’s primary duty must be managing the business, or a part thereof.
  • Under the administrative exception, the employee’s primary duty must include “the exercise of discretion and independent judgment with respect to matters of significance.”
  • Under the professional exception, the employee’s primary duty must be to “primarily perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”

Other Changes in the Rule

The new rule also makes changes to the highly compensated employee exemption, under which certain highly paid employees are exempt from overtime pay requirements even though they do not fall into any of the exemptions discussed above. The rule raises the threshold for exemption from $100,000 to $134,004 per year. This figure will also be revised every three years.

Finally, the new rule sets forth how bonuses are treated for purposes of determining an employee’s exempt status. Bonuses can satisfy up to 10% of the new minimum salary requirement.

Call a San Jose Employment Attorney to Discuss What Action Your Business Must Take

The San Jose employment lawyers at Structure Law Group, LLP understand that employers may need guidance to be in compliance with this new federal law. Call 408-441-7500 or email today to speak to an attorney about how this new rule will affect your business.