This article is the first in a three-part mini-series about the new Department of Labor (DOL) regulations that were scheduled to take effect December 1. Part 1 is an overview and review of the DOL rules with regard to exempt v. non-exempt employees, Part 2 highlights the changes taking place, and some essential facts, as of December 1, and Part 3 summarizes four of the options you have to ensure you comply with the new rules without negatively impacting your business.
Unless an employee is classified as “exempt” under the DOL regulations, then – generally – he/she must be paid overtime at the rate of 1.5x their normal hourly rate for all time worked greater than 40 hours in a work week. This is true even if the employee is paid a salary. Employers typically prefer their employees be exempt because paying for overtime can be very expensive.
There are three tests for determining whether an employee is exempt. These tests are often referred to as the “white collar” exemptions, and they are:
- Salary basis – the employee must be paid on a salary, rather than hourly, basis, i.e., the pay is not subject to reduction based on quantity of work
- Salary level – the employee must earn a minimum salary of $455 per week ($23,660 annually)
- Duties – the employee’s primary job duty must be executive, administrative, or professional in nature.
In order for the white collar exemption to apply, an employee must meet ALL of the above criteria. Most disputes surrounding whether an employee is exempt from overtime pay center on the duties test. An explanation of the duties test is too involved and complicated for this article, but briefly, an executive employee is someone involved in managing the business or a department thereof, an administrative employee has discretion and independent judgment with respect to matters of significance, and a professional employee performs work that requires advanced knowledge in a field of science or learning.
If you have any general questions about the DOL regulations, or any specific questions about whether your employees’ duties are executive, administrative, or professional in nature, please do not hesitate to reach out to us for additional information and guidance in this area.
Except for teachers, lawyers, and doctors, who are not subject to either the salary basis or salary level requirements.
Joe received his law degree from the University of North Carolina–Chapel Hill School of Law and his Accounting degree from the University of Rhode Island. He is admitted to practice law in Connecticut, Massachusetts, and Rhode Island, and he is a CPA. He is an Adjunct Professor and lecturer at the University level and has been a frequent speaker on business planning and legal matters.
Latest posts by Joe Fournier (see all)
- Three Considerations for Using KPIs in your business - March 22, 2018
- Estate Dispute? Do these four things now - March 14, 2018
- The New Tax Act Summary - March 1, 2018