The increase in the minimum salary for overtime exemption ($913.00 per week) is fast approaching and a number of employers still haven’t fully grasped all the nuances of the impending change.
Fortunately, the Department of Labor (DOL) continues to offer support, most recently in the form of a lengthy new Q & A based on questions received after their informational webinars on the topic. We have distilled many of the major points and more helpful reminders below.
Can we make some people in a job classification exempt and others not?
Absolutely. If some of your employees are exempt because they meet the salary test and others remain below the threshold, there is no problem from the DOL’s standpoint. Exemption is based on the particular circumstances of each employee and there is no requirement that everyone be treated exactly the same.
Do we still have to pay $47,476 even if we only operate 9 months a year?
No – the test is whether the employee earns $913.00 a week for each week that they work (excluding first and last weeks if they start or end in the middle). There is no obligation to account for times when the employer is not operating.
What is the salary requirement for part time salary workers?
$913 per week, the same as it is for full time employees. The exemption threshold is not prorated for people working less than full time.
If someone is going to earn less than $913.00 per week, does that mean that we must pay them hourly?
No. Non-exempt people can be paid on a salary basis as long as (a) they are paid more than the minimum wage for all hours worked and (b) they are paid overtime for all hours in excess of 40 in the week. In other words, the DOL doesn’t care how you pay the non-exempt people as long as they receive the amount of pay they are entitled to receive under the law.
If we pay salaries to non-exempt employees, do we still have to observe the rules about not docking an employee’s pay?
No. The no-docking rule for salaried employees relates only to maintaining the exemption from overtime. If the employee is not exempt, those rules do not matter.
Some of our people who will no longer be exempt resent having to now punch a time clock. What can we do about that?
While there is a record keeping requirement for non-exempt employees, there is no required method or form for keeping these records. For employees who work a strict schedule with very little variation, an employer could choose for example to simply retain the actual work schedule and just note any changes on the schedule if they occur. For employees with more variable schedules, different methods are available.
In fact, the DOL says that actual start and stop times are not needed – employers need only maintain records of the total number of hours worked. The employer should just be sure that whatever method they are using to record hours is accurate.
How does that non-discretionary bonus exception work?
Assuming that the employee performs bona fide exempt duties, exemption will apply if they receive at least 90 percent of the threshold (approximately $822 per week) as a salary and earn at least 10 percent of the standard salary level (approximately $91 per week) in non-discretionary bonuses or incentive payments (including commissions), provided that such payments are paid on a quarterly or more frequent basis.
Non-discretionary bonuses are those that are paid based on standard formulas or conditions, and are not based upon the whim or subjectivity of the employer.
Does the quarterly basis have to be a calendar quarter? Does the quarter have to be the same for everyone?
No to both questions. The quarter can be any three-month period designated by the employer, and it can differ by employee, department or any other grouping.
What won’t change on December 1?
Quite a bit. The duties tests for the white collar exemptions have not changed, nor have the exemptions for inside or outside sales. The manner of determining which deductions are permissible under the salary method also has not changed. In addition, while computer professionals are subject to the new salary standard, the alternative wage measurement ($27.63/hour) for exemption remains the same and is now closer to the salary test on an annualized basis.
Bottom Line
December 1 will be here before you know it. If you haven’t conducted the necessary evaluations of your work force and begun implementing changes, do not delay even a single day longer.