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HOW TO PREPARE FOR THE NEW EXEMPTION RULING

Part 1

By now you have likely heard of the Department of Labor’s new Final Rule on the annual salary minimum for exemption from overtime. The December 1, 2016 effective date gives employers approximately six months to assess the impact of the new salary limits; make decisions about what changes to make to ensure compliance; implement new policies, procedures and systems to support the new changes; communicate the changes to those who will be impacted; and train leaders how to manage the changes.

1. Establish Who Will Not Be Impacted Employees who are being paid on an hourly basis and paid overtime for hours worked over 40 per week will not be impacted. Certain professionals including outside sales employees, physicians, lawyers, judges, teachers and certain academic administrative personnel in educational institutions are not subject to the new salary limits. Certain retail employees paid on a commissioned basis will also not be impacted. There is no change to the annual salary limit for computer professionals who qualify for the DOL’s exemption for computer professionals, but the weekly limit will be raised to $913 per week. (See DOL Computer-Related Exemptions Fact Sheet.)

2. Determine Who Will Be Impacted Identify all current salaried, exempt employees who make less than $47,476 per year. The $47,476 minimum can include no more than 10% from nondiscretionary bonuses, incentive payments, and commissions that are paid at least quarterly. If you have employees who are not paid the same salary amount throughout the year, identify any who make less than $913 per week. Identify any employees who are currently making less than $134,004 and do NOT meet the full criteria for executive, administrative, professional, outside sales or computer-related exemptions. (See DOL Highly-Compensated Workers Exemption Fact Sheet.) Also review the duties of all employees currently classified as exempt, regardless of income, to ensure they meet the “duties tests” of exemption eligibility. While the duties tests for exemption eligibility did not change, now is a good time to reclassify exempt employees whose duties have changed or who have been misclassified. (See DOL Exemption Fact Sheet.)

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