While the updated salary requirements to be exempt from overtime are receiving all the headlines there were other important changes that will go into [WHEN] effect. One of those changes is a new rule that allows an employer to count non-discretionary payments towards the new $47,476.00 salary threshold. The rule caps this amount at [THE LESSER OF/GREATER OF] 10% [OF WHAT?] or $1,186.90 per quarter. Under the old rules, these types of payments could not be applied towards an employee’s salary.
What is a Non-Discretionary Payment?
The DOL defines a non-discretionary payment as follows:
Non-discretionary bonuses include those that are announced to employees to encourage them to work more steadily, rapidly or efficiently, and bonuses designed to encourage employees to remain with a facility
Common examples of these types of payments include retention bonuses, bonuses based on clearly defined objectives, and commission payments that are based on a clearly defined formula. Each of these payments must be easy to compute and apply objectively without any potential for dispute as to the amount of, or entitlement to, the payment. Accordingly, to the extent the payment may be subject to some discretion (e.g., the employer can divide the commission between two employees, they are subject to some other subjective condition) it may not be considered non-discretionary.
What Does the New Rule Say?
The final rule allows an employer to make up 10% of an employee’s salary by applying earned non-discretionary payments. As a result an employee’s salary could be $42,728.40 and still meet the new salary requirements so long as the employee earns $4,747.60 in non-discretionary payments. The rule requires the non-discretionary payments to be paid at least on a quarterly basis and in the event the employee does not earn enough non-discretionary payments in the quarter an employer is permitted to “make-up” the difference to maintain the exemption for the employee.
Maduff & Maduff has recovered millions of dollars in unpaid wages and overtime wages for employees improperly paid or misclassified. And although retaliation for bringing an overtime claim is rare, it is illegal and we have successfully prosecuted companies for retaliatory acts. If you believe that you are not being paid for all hours worked, or you are not properly classified, you need an employment lawyer. Call us today.