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Proposed Overtime Exemption Rules Allow Use for Bonuses or Commissions for 10% of Minimum Salary

    Client Alerts
  • March 22, 2019

Last week, we reported on new proposed Department of Labor regulations that would raise the minimum salary for claiming the “white collar” overtime exemptions to $35,308 per year. In addition to the new salary level, the proposed rules would permit employers to count incentive compensation toward a portion of this minimum.

Specifically, the new rules would allow employers to count non-discretionary incentive bonuses and commissions toward up to ten percent of this minimum salary. If the employee fails to earn a sufficient amount of incentive compensation by the end of the year, the employer must pay the difference between the earned amount and the FLSA minimum salary to preserve the exemption claim. This make up payment must be included in the first payroll following the end of the given year. This additional payment would not count toward minimum compensation for the subsequent year in which it is actually paid.

DOL is accepting comments on this ten percent level, and whether it should be increased or decreased in the final rule. Given the relatively low salary level required to claim the overtime exemptions under the proposal, most employers should have little problems meeting this level, with or without using additional incentive pay.