Yesterday, the White House announced a Department of Labor (DOL) Final Rule increasing the minimum salary for exempt (salaried) employees to $47,476, effective December 1, 2016. The current minimum salary threshold for exempt employees is $23,660 annually ($455/week).

Other Important Points:
  • The Rule establishes a mechanism for automatically updating the salary and compensation levels every three years.
  • 10% of the new minimum salary can be met with non-discretionary bonuses and incentive payments, including commissions.
  • There will be legal and legislative challenges to the Final Rule. However, we recommend that you prepare for the December 1, 2016 effective date.
Next Steps:

Employers should promptly identify all exempt employees earning a base salary of less than $47,476, and develop a plan to comply with the Final Rule.
Options include but are not limited to:
  • Reclassifying exempt employees to non-exempt, meaning they will now be eligible for overtime pay for all hours worked over 40 in a given week;
  • Raising the pay of exempt employees who are under the new minimum salary threshold;
  • Re-working bonus and incentive plans of exempt employees to meet the new salary threshold; and
  • Ensuring employees who will remain exempt meet the current "duties" tests, which will not change under the Final Rule.
If an employer intends to reclassify exempt employees to non-exempt, employers must also consider:
  • How many hours are those employees currently working?
  • Will their current hours per week result in costly overtime pay to the company?
  • How will you control overtime costs and track time of reclassified employees?
  • Will the re-classification impact any employee benefits, e.g., vacation or PTO?
  • Do you need additional staff to prevent or limit overtime pay?
  • What is the best way to communicate the changes without anyone feeling they've been demoted?
► Back to News & Resources