Exempt Employee Status is More Than $47,476 a Year in Business and at Work
The new Federal overtime regulations came out last week to a big media splash, raising the Federal minimum annual salary to determine that an employee is exempt from overtime to $47,476 a year effective December 1, 2016.
However, concluding that an employee is exempt is not based on that new minimum annual salary alone. As I’ve mentioned previously, at best, determining an employee’s exemption from overtime (a.k.a. “exempt” status) is a case-by-case analysis exercise.
As explained on the U.S. DOL Wage & Hour Division website:
Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.
Simply put: if you give a secretary (or administrative assistant) in your organization the title of Director of Administration at $47,476 a year, those actions alone do not make the job exempt from overtime. Also from the Wage & Hour Division website:
To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $913 per week (effective December 1, 2016).
In order to make the above determinations, an accurate and current job description for each of your organization’s employees must first be in place (among other data you must gather, including but not limited to the employee’s pay rate) to confirm (or deny) whether an employee is exempt from or eligible for overtime.
For many of my clients and colleagues, the clearest path to compliance is to make the majority of their employees hourly nonexempt, and therefore eligible for overtime (in New York state, overtime is paid for any hours worked over 40 in a work week – your state and/or municipal overtime mileage may vary).
And as we all prepare to ensure compliance with the new regulations effective December 1, 2016, please keep the following in mind:
- Start reviewing the above information now, partnering with either internal or external experienced HR practitioners, as well as an experienced management-side labor lawyer. If you don’t know a good management-side labor lawyer, message me directly and I’ll make some recommendations – I don’t do work in this area without working hand-in-glove with a great management-side labor lawyer, and neither should you;
- Federal DOL continues to hire Wage & Hour Examiners to ensure compliance with the December 1, 2016 regulations, telegraphing that they will proactively pursue enforcement; and
- Obviously, increasing a current exempt employee’s salary to at least the new minimum salary is a good first step – however, don’t make it your sole action in response to the new regulations.
I know – this subject is about as interesting as watching paint dry. What may pique your interest in the subject is that an employee misclassified as exempt from overtime who is actually eligible for overtime (and this is often determined independently by a DOL audit) can needlessly cost an organization thousands of dollars in back pay (over several years) and DOL-levied penalties.
If you do choose to classify eligible positions in your organization as exempt from overtime, ensure that your documentation and due diligence are in order (as well as your salary levels) to the satisfaction of state and federal DOL, in business and at work.