New Federal Overtime Rules Take Effect December 1, 2016

The Department of Labor (DOL) has issued a final rule securing overtime wages for millions of workers. The minimum salary for overtime eligibility under the white collar exemptions will increase from $23,660 to $47,476. This means if you earn a salary of less than $47,476, you will likely be overtime eligible on December 1, 2016. In other words, if you make less than $47,476, your employer will have to start paying you overtime pay when you work more than forty hours in a workweek.

This change is long overdue. The last time the overtime eligibility threshold was significantly raised in 1975, it was raised to $23,660. At that time 61% of salaried employees earned less. Today, on average, over 90% of salaried workers in a state make over that amount.

Two Requirements to Qualify for New Overtime Exemptions

To fall under the overtime exemption, a white collar employee must:

1) Be paid a salary above the threshold set by the DOL (currently $23,660, or $455/week); and
2) Must have occupational duties fitting one of the three types of white collar exemptions (executive, administrative, or professional employees). To find out if your position qualifies under the white collar exemption, read Attorney Summer Murshid’s article on exempt employees.

This change will mean that almost all workers with an annual salary under $47,476 will be entitled to overtime pay for work over 40 hours – regardless of the duties he or she performs. This is great news for millions of American workers.

The change will be effective on December 1, 2016.

Many Workers Are Currently Misclassified as Exempt from Overtime Wages

Even if you currently earn a salary at or above $23,660, you may nonetheless be entitled to overtime wages. Many workers are misclassified as exempt right now, because the job duties they perform do not qualify them as exempt, and they should be receiving overtime pay under the current rules. The DOL estimates 20% of the current salaried workforce is misclassified as exempt and should be receiving overtime right now!

To fall under the first of the three white-collar exemptions, the administrative exemption, employees must exercise discretion and independent judgment with respect to matters of significance, and their primary duty must be directly related to the running or servicing of the business. This includes (but is not limited to) such functions as accounting, budgeting, purchasing, marketing, human resources, regulatory compliance, and similar activities. Employers frequently misinterpret this exemption and presume any “desk job” is overtime exempt, which is not the case.

Similarly, under the second major white-collar exemption, the professional exemption, many workers do not have the education and/or experience necessary to meet the exemption, and thus should be paid overtime wages.

Lastly, the executive exemption applies to individuals who manage a business, or a subdivision of an enterprise. These employees must oversee multiple employees, and they must also have input into the hiring, firing and promotion of other employees. Frequently, assistant managers or shift manager are classified as exempt executives, but truly should be paid overtime wages.

The Department of Labor’s rule change for white collar exemptions will be a welcome change that will potentially help millions of workers when it goes into effect on December 1, 2016. But there are also many employees working over forty hours a week being illegally denied overtime pay right now, under the current regulations.

If you think you might be misclassified and owed overtime pay, call our office to speak with one of our experienced wage and hour attorneys and receive a free evaluation. Please call our Madison office at (608) 257-0040 or our Milwaukee office at (414) 271-8650 to find out if you may be owed overtime wages.

Further Related Reading on Overtime Wage Issues

What is an “Exempt” Employee?
Overtime Pay is Mandatory for Most Wisconsin Employees
Common Examples of Illegal Unpaid Overtime
Attorney Johnson quoted in Wisconsin Lawyer on likely continued increase in Wage and Hour Litigation
Asst. Managers Misclassified as “Exempt” from Overtime Pay May Sue for Back Pay