Under current law, salaried employees making at least $455 per week ($23,660 per year) and who meet the requirements under the “primary duty” test are exempt from overtime compensation. Under DOL’s proposed rule, the minimum salary has increased to $970 per week ($50,440 per year) or the 40th percentile of weekly earnings for full-time salaried employees in the U.S.
Any salaried employee making less than $970 per week will be entitled to overtime pay should he or she work more than 40 hours per week—meaning some employees will be eligible for overtime pay simply because they do not meet this higher income threshold.
The proposed rule also changes the annual salary level for highly compensated employees (HCEs), too. Currently, HCEs are exempt from overtime pay if they earn a yearly salary of $100,000. Under this proposed rule that figure changes to $122,148 or the 90th percentile of earnings for full-time salaried employees in the U.S.
To ensure that these new salary levels stay current, the proposed rule will index them either to a fixed percentile of earnings (40th and 90th, respectively) or to the Consumer Price Index (CPI).
The DOL was also expected to alter the primary duty test. For now, it has not. However, it will seek comments regarding whether the current test is functioning appropriately.
The Takeaway
These proposed salary levels are meant to create a bright line test for employers and employees regarding who is exempt from overtime pay. Unfortunately, this rule may force club leaders to re-evaluate their current staffing plans, change employees’ hours and shifts, and alter employee compensation packages to minimize potential increases in overtime obligations.
Although this proposed regulation is still up for public comments and thus further changes, it is our expectation that the final DOL Overtime Rule will be fully enforceable by early 2016.
President Obama has voiced strong support for this rule; thus, we do not expect DOL to make significant changes to it. While NCA understands that these regulations were certainly due for updating, we had hoped for a rule with less impact on clubs and their employees. With that in mind, we look forward to working with DOL and our friends on Capitol Hill to find reasonable ways to modify the rule before it is finalized.