On December 1, 2016, big changes are coming to the minimum salary requirements for exempt employees. The U.S. Department of Labor is significantly raising the minimum salary that an employee must receive to qualify as exempt from overtime.
Employees who qualify for the professional, executive or administrative exemption will see their minimum salary rise from its current level of $455/week ($23,660/year) to $913/week ($47,476/year). Employees who qualify for the highly compensated exemption will see their minimum compensation rise from its current level of $100,000/year to $134,004/year.
There is no phase in or grace period for the increased salary requirements. The changes take effect immediately on December 1, so employers must be certain their salaries comply with the new rules on that date. The consequences for not complying can be severe. Not only will the employee be entitled to overtime for all hours worked beyond forty hours in a workweek, but the exemption may be permanently lost.
Keep in mind that in addition to the salary test, an employee must also satisfy the “duties test” to qualify as exempt from overtime. In general terms, the employee must spend the majority of his or her time performing nonmanual, higher level duties of a professional, executive or administrative nature. The Department is not changing the requirements of the duties test, but it makes sense for employers to take this opportunity to review the duties of employees who might qualify, to assure they satisfy the duties test.
Determining whether an employee qualifies as exempt can be very challenging. You cannot rely on job titles or job descriptions, but must analyze the circumstances of each employee’s work. It is not unusual to have two employees with the same job title and job description, but only one who qualifies as exempt because of differences in what they actually do on the job every day.
The penalties for misclassifying an employee as exempt and failing to pay overtime are harsh. Of course, the employee will be entitled to back pay for the unpaid overtime. In addition, under federal law the employee is entitled to penalty wages of double the amount of unpaid overtime and up to 30 days’ additional wages under Oregon law, plus interest in both cases. State and federal regulators may also impose stiff civil fines for each violation.
Give us a call if you have any questions or concerns and we will work with you to assure you are in compliance.