In May of 2016, the U.S. Department of Labor revised its rule regarding the classification of workers exempt from overtime pay, though the implementation of these important changes to federal wage and hour regulations are in limbo due to a legal challenge pending in the federal courts and potential opposition from the new presidential administration. Under the new rule, which was intended to take effect on December 1, 2016, it was predicted that employers will need to begin paying overtime to more than four million workers now classified as exempt. Among other changes, the new rule would:

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• Raise the minimum monthly salary of an exempt worker to $913/week or $47,476/year for a full-year worker.

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• Raise the minimum annual salary for “Highly Compensated Employees” subject to a minimal duties test to $134,004.

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• Provide for updating/increasing these minimums every three years beginning on January 1, 2020 in order to keep pace with wage growth.

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• Alter the way in which an employee’s salary is calculated, permitting up to 10% of the computed salary level to come from the inclusion of non-discretionary bonuses, incentive payments, and commissions that are paid at least quarterly.

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To meet the requirements of this new rule, employers will need to carefully review the compensation paid to their exempt employees. At least for some workers classified as exempt at many firms, employers soon may need to adjust their relationship with these workers by increasing their pay, reducing their hours, or paying them time-and-a-half for overtime.