Is Your Company Ready to Comply With the New Federal Overtime Regulations?

On December 1, 2016, the US Department of Labor's (DOL) monumental changes to the overtime regulations will take effect, making an estimated 100,000 salaried workers in Michigan eligible for overtime pay. 

Employers will need to look at each of their employees to determine if they will become eligible for overtime under the new rule. Generally speaking, there are three tests that must be met for an overtime exemption to apply. Employees must meet all three of these tests to be considered exempt:

  1. Salary Level – The current salary level of $23,660/year ($455 per week) is increasing to $47,476/year ($913 per week) on 12/1/16.  Workers who do not earn at least $47,476 a year ($913 a week) will have to be paid overtime, or “time and a half,” even if they meet the “job duties test” by classified as a manager, professional, etc. Under new rules, non-discretionary bonuses and incentive payments (including commissions) can satisfy up to 10 percent of the new standard salary level.
  2. Job Duties Test – If the employee meets the salary level test you cannot assume he or she is exempt from overtime. The employee must also be performing certain PRIMARY job duties as specified by DOL:
    • Executive Employees (manage business, supervise, hire and fire)
    • Administrative Employees (office work related to the management of the business…must have discretion over matters of significance)
    • Professional Employees (doctors, lawyers, teachers)
    • Outside Sales Employees (primary duty is sales or obtaining orders/contracts away from the employer’s place of business)  
    • Certain Computer-Related Employees
    • Highly-Compensated Employees (making over $134,004 annually)      
  3. Salary Basis Test - Finally, if the employee meets both the salary level test ($47,476) and one of the primary duties test, you must also determine whether the employee meets the salary basis test as specified by DOL. Generally speaking, an employee is paid on a salary basis if s/he has a "guaranteed minimum" amount of money s/he can count on receiving for any work week in which s/he performs "any" work. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.

The new regulations are complex, but employers should work now to make sure they are in compliance on December 1. Wage and hour lawsuits are at an all-time high and we fully expect DOL to aggressively audit employers and to assess penalties for those found to be out of compliance.  

For further information, please visit the Michigan Chamber’s Issue Center or attend this Chamber webinar.