IAM is providing these revised overtime pay requirements as guidance only. We encourage your company to confer with qualified counsel prior to implementing pay schedules and employee classification under the new rules.

Department of Labor Background on Revised Overtime Pay Requirements

Beginning December 1, 2016, the Department of Labor will require employers to follow revised overtime pay and eligibility rules for exempt employees. Currently, exempt administrative, professional and other employees earning more than $26,660 a year are not eligible for overtime pay when working more than 40 hours per week. 

The new rule increases the salary threshold for exempt employees to $47,476 per year ($913 per week), and is expected to impact at least 4.2 million workers as currently classified. Plainly stated, any salaried worker who earns less than $47,476 will be eligible for overtime pay under the new rule.

The salary threshold will be adjusted (increased) every three years. IAM encourages you to carefully consider all of your employees, their current classification and pay level when reviewing the new rules.

Overtime Pay Eligibility

Guidelines on whether or not to classify your employee as exempt or non-exempt

Some employees who earn at least $913 a week may be exempt from overtime pay, if they meet the appropriate “tests” for their classification (listed below, along with responsibilities).

If you can answer “NO” to any of the following questions, you may have misclassified your employee as exempt.

Executive Employee

1. Is the employee’s primary duty managing the enterprise or a department or subdivision of the enterprise?   

2. Does the employee customarily direct the work of two or more other employees or their equivalent?

3. Does the employee have the authority to hire or fire, and do her recommendations carry significant weight if unauthorized to make the final decision?

4. Is the employee paid the equivalent of at least $913 per week on a salary basis?

Administrative Employee

1. Is the employee’s primary duty performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers?

2. Does the employee exercise discretion and independent judgment with respect to matters of significance? That is, does he or she evaluate and compare possible courses of action and then make a decision or recommendation after considering the various possibilities?   

3. Is the employee paid the equivalent of at least $913 per week on a salary basis?

Learned Professional Employee

1. Is the employee’s primary duty to perform work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction?

2. Is the advanced knowledge obtained by completing an academic course of study resulting in a four-year college degree or leading to certification?   

3. Is the employee paid the equivalent of at least $913 per week on a salary basis?

Creative Professional Employee

1. Is the employee’s primary duty to perform work requiring invention, originality or talent in a recognized field of artistic endeavor such as music, writing, acting and the graphic arts?   

2. Does the work require more than intelligence, diligence and accuracy (i.e., does it require “talent”)?

3. Is the employee paid the equivalent of at least $913 per week on a salary basis?

Computer Professional

Is the employee paid at least $913 per week on a salary or fee basis, and is the employee’s primary duty:

1. Application of system analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; or

2. Design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or

3. Design, testing, documentation, creation or modification of computer programs related to machine operating systems; or

4. A combination of the aforementioned duties requiring the same level of skills?

Outside Sales Employee

1. Is the worker’s primary duty making outside sales?

2. Does he or she regularly work away from the company’s place of business?   

3. Does the worker sell tangible or intangible items, such as goods, insurance, stocks, bonds or real estate, or obtain orders or contracts for services or the use of facilities?

The Department of Labor has issued a FAQ document from webinars hosted on the new pay requirements.  These FAQs answer a number of pay scenarios that are not entirely clear from the final rule. 

IAM is providing these revised overtime pay requirements as guidance only. We encourage your company to confer with qualified counsel prior to implementing pay schedules and employee classification under the new rules.