New DOL Overtime Rules: Compliance and Litigation Prevention Tips – May 18, 2016
PerkinsCoie
Description
increases to the minimum salary requirements. Every three years, beginning January 1, 2020, the standard threshold will
be raised to the 40th percentile of full-time salaried workers in the lowest-wage census region, which the DOL estimates
to be $51,168 in 2020. The automatic update will apply to highly-compensated employees as well. Every three years, the
highly-compensated employee threshold will increase to the 90th percentile of full-time salaried workers nationally, which
the DOL estimates will be $147,524 in 2020.
The DOL will post new salary levels 150 days in advance of their effective date, with the first such posting on August 1, 2019. Practical Implications The changes to the minimum salary requirement will result in extending overtime protections to millions of workers who were historically exempt. Employers must carefully review classifications for their workforce to determine what changes must or should be made in response to the final rule. Most obviously, employers must determine whether any employees currently treated as exempt will fall below the new salary threshold. Employers should take particular care to evaluate the total compensation package for such employees, to determine whether employees currently receive other forms of incentive pay that can be counted toward the minimum salary threshold.
Employers should also determine whether they can and should alter the form of incentive pay so that it can used for this purpose, e.g., making discretionary bonuses non-discretionary or paying annual non-discretionary bonuses on a quarterly, rather than annual, basis. But employers should also take advantage of the longer-than-expected implementation period provided by the DOL to review the classification of their workforce more deeply—and should consider doing so as part of a privileged review done by or under the direction of counsel. Although the final rule affects only the quantitative salary basis test and not the qualitative duties test, employers should not treat compliance with the new rule as a mere math exercise. The final rule has cast a bright spotlight on the issue of which workers are and can be treated as exempt.
This is likely to prompt increased misclassification lawsuits brought by employees who meet the new salary threshold but perform a mix of exempt and nonexempt tasks that raise questions under the existing duties tests. Employers should consult with their wage-and-hour counsel to determine the best way to review positions that are currently treated as exempt to determine whether those positions are affected by the changes. Read the full text of the DOL’s final rule. Read the DOL’s additional guidance on the final rule. © 2016 Perkins Coie LLP CONTACTS William (Ben) Stafford Partner Seattle D +1.206.359.6217 Chelsea Dwyer Petersen Partner Seattle D +1.206.359.3993 Related Services Labor & Employment Law © 2016 Perkins Coie LLP .
The DOL will post new salary levels 150 days in advance of their effective date, with the first such posting on August 1, 2019. Practical Implications The changes to the minimum salary requirement will result in extending overtime protections to millions of workers who were historically exempt. Employers must carefully review classifications for their workforce to determine what changes must or should be made in response to the final rule. Most obviously, employers must determine whether any employees currently treated as exempt will fall below the new salary threshold. Employers should take particular care to evaluate the total compensation package for such employees, to determine whether employees currently receive other forms of incentive pay that can be counted toward the minimum salary threshold.
Employers should also determine whether they can and should alter the form of incentive pay so that it can used for this purpose, e.g., making discretionary bonuses non-discretionary or paying annual non-discretionary bonuses on a quarterly, rather than annual, basis. But employers should also take advantage of the longer-than-expected implementation period provided by the DOL to review the classification of their workforce more deeply—and should consider doing so as part of a privileged review done by or under the direction of counsel. Although the final rule affects only the quantitative salary basis test and not the qualitative duties test, employers should not treat compliance with the new rule as a mere math exercise. The final rule has cast a bright spotlight on the issue of which workers are and can be treated as exempt.
This is likely to prompt increased misclassification lawsuits brought by employees who meet the new salary threshold but perform a mix of exempt and nonexempt tasks that raise questions under the existing duties tests. Employers should consult with their wage-and-hour counsel to determine the best way to review positions that are currently treated as exempt to determine whether those positions are affected by the changes. Read the full text of the DOL’s final rule. Read the DOL’s additional guidance on the final rule. © 2016 Perkins Coie LLP CONTACTS William (Ben) Stafford Partner Seattle D +1.206.359.6217 Chelsea Dwyer Petersen Partner Seattle D +1.206.359.3993 Related Services Labor & Employment Law © 2016 Perkins Coie LLP .
