U.S. DOL Issues New White Collar Exemption Regulations, But

The U.S. DOL is only (substantially) increasing the salary test for the time being. That's right. No changes to the duties tests for now.

Unless Congress acts (and overrides a veto I'm sure would be coming), the base salary for an exempt executive, administrative or professional employee will rise from its current $23,660 to $47,476 on December 1, 2016.    That's a federal law.  So, that means that if you have exempt manager employees who make less than $47,476 on December 1, they are non-exempt as of that date unless you give them a raise.

Now this change does not affect outside sales, or retail commission exempt employees. Only the ones who require a salary to be exempt.

In California, the minimum wage is currently $10.00  an hour. So, the minimum salary test is $20 X 2080 = $41,600.  That means that everyone in California who is exempt must be making at least $47,476 base salary on 12/1/16 or they will lose the exemption.

One issue that will help satisfy the federal test but may not help in California.  Under the new regulations, it will be OK to count bonuses, commissions, or other variable compensation towards up to 10% of the minimum salary requirement.  Only certain types of bonuses etc. apply so read the regulations. That may not work in California, where salary is supposed to be a fixed sum.  We shall see if state law follows the new rule.

And let's not forget that on 1/1/17, the California minimum wage goes up to $10.50 an hour. The California minimum exempt salary will then be $43,680.  That's still lower than the federal minimum!

Another major change affects the federal "high compensation" exemptions - which don't apply in California. These are relaxed duties tests for people who make more than $100,000 per year.  That $100,000 threshold goes up to $134,004, again on 12/1/16.

The federal salary test will increase every three years, too.  So, look for a $51,000 minimum salary in 2020.

I know this is not welcome news. But it's a whole lot better news than the proposed regulations, which were going to make it very tough to qualify people as exempt under federal law.  As it is, the DOL estimates that some 4.2 million workers will become eligible for overtime under the new regulations, (presumably unless the employers increase their salaries).

The U.S. DOL has put out some FAQs that you can review here.  

Don't blow this. Overtime liability comes with serious penalties.