Final Overtime Rule Issued, New Salary Tests Effective December 1

The Department of Labor has released the first major overhaul of federal overtime pay rules in more than a decade, dramatically increasing the salary levels at which professional, executive and administrative employees will be exempt from overtime.

Under the new rule, which becomes effective December 1, the salary level for so-called "white collar" workers such as store or department managers increases from the current $23,660 a year ($455 per week) to $47,476 annually ($913 per week). Future increases will take effect every three years thereafter, tied to national wage payment data.  Employees must be guaranteed the minimum salary to qualify for overtime exemption, but employers will be able to count non-discretionary bonuses, incentive pay or commissions for up to 10% of the required minimum salary, with adjusting payments to be made no less frequently than quarterly.

The final rule makes no change in the so-called "duties" test, which spells out criteria for each category of exempt worker.

The salary test for high-compensated workers, who are subject to a more streamlined duties test, goes up from $100,000 annually to $134,000 a year.

Text of the final rule, together with a lengthy explanatory introduction, can be found here