Companies Ready for the Impending White Collar Exemption Rule
November 22nd, 2016
Update (11/23): Judge Suspends Rule Expanding Overtime for Millions of Workers
Original story follows:
The “white collar” exemption of the Fair Labor Standards Act will go into effect on December 1, 2016. Under the new rule, announced last May, any salaried employee earning less than $913 a week or $47,476 annually would automatically qualify for overtime pay when exceeding 40 hours a week.
The White Collar Exemption Rule is set to impact 132,000 New Jersey workers and 4.2 million workers worldwide and is expected to raise the company salary threshold across the country. Before the “white collar” rule, many “white collar” workers were exempt from any overtime pay, and now, with the new rule in place, employees can earn extra money beyond their regular weekly hours.
“The Department of Labor will issue violations if time-keeping fails to exist since federal law mandates the tracking hours for all employees who are at or below the $47,476 salary threshold,” explained Karen Koch, CPA, an accounting supervisor based in the WithumSmith+Brown New Brunswick office.
“Maintaining accurate records will also help with the repercussions of this new rule. Potentially, there could be an uptick in lawsuits filed by employees or former employees over wages and hours, particularly if businesses opt to trim their workforce to reduce salary costs.”
To qualify for The White Collar Exemption Rule, The Department of Labor listed the following qualifications:
- First, they must be paid on a salary basis not subject to reduction based on quality or quantity of work (“salary basis test”) rather than, for example, on an hourly basis;
- Second, their salary must meet a minimum salary level, which after the effective date of the Final Rule will be $913 per week, which is equivalent to $47,476 annually for a full-year worker (“salary level test”)
- Third, the employee’s primary job duty must involve the kind of work associated with exempt executive, administrative, or professional employees (the “standard duties test”).