After months of preparing for the new salary threshold for overtime exemption, we hear the threshold may drop a bit and that all of the new exemption changes may now be enacted in a matter of weeks.
The Department of Labor (DOL) has now indicated that employees might need to earn a salary of only $47,000 annually (just over $903.00 per week) to be exempt instead of $50,440 annually ($970.00 per week). The new threshold would be just about twice the current salary level for exemption ($455.00 per week).
Non-Discretionary Bonuses Could Count Toward the Total
One often overlooked aspect of the DOL’s proposed regulations is the possibility that employers might be able to use non-discretionary bonuses and incentive payments “to satisfy 10 percent of the standard weekly salary level.” Thus, if the new minimum salary really is $47,000, the Proposed Rules would permit an employer to meet this test by paying an employee a salary of $42,300 and offering bonuses of $4,700.
Importantly, however, the Proposed Rules require that “in order for employers to be permitted to credit such [bonuses] toward the weekly salary requirement employees would need to receive the bonus payments monthly or more frequently.” This means that an employer could not pay the bonus annually and then credit it back proportionally over the last 12 months in order to meet the exemption threshold.
It remains to be seen whether the Final Rules will in fact permit employers to use non-discretionary bonuses and incentive payments to satisfy the revised salary level requirement. If they do, many questions still remain as to how this can be accomplished.
Bottom Line
We know that the exemption threshold will change but how much and when is still a mystery, even at this late date. Whatever salary level is ultimately selected, the change will be huge and employers should be working hard right now to get ready.
For guidance on how to address the new salary threshold, please see our post entitled How to Get Ready For Overtime Exemption Changes.