DOL Issues Final Rule Doubling the Salary Threshold for Overtime Exemption

Kollman & Saucier
Kollman & Saucier
05/18/2016

Later today, over two scoops of butter pecan, Vice President Joe Biden and United States Department of Labor Secretary Tom Perez will appear at an ice cream parlor in Ohio to announce that the DOL has issued a Final Rule that will allow more workers to qualify for overtime pay under the Fair Labor Standards Act (FLSA).

The long-awaited final rule doubles the salary threshold at which a worker may qualify as exempt from receiving overtime.  Currently, workers earning more than $23,660 per year are not eligible for overtime pay if they also perform certain executive, professional or administrative duties.  The new rule increases the salary level to $47,476 per year ($913 per week).

According to the Wage and Hour Division of the DOL, the rule contains the following provisions and changes to current regulations:

  • The rule only applies to the administrative, executive, and professional exemptions under FLSA.
  • The rule will automatically update the salary levels every three years, and is expected to rise to $51,168 when it is next adjusted in 2020.
  • The rule permits employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to ten percent (10%) of the new salary calculation.
  • The rule increases the total annual compensation for highly compensated employees subject to a minimal duties test from $100,000 to $134,004.
  • The rule becomes effective on December 1, 2016.

The Rule is estimated to affect 4.2 million workers.  Although the Rule may not seem so sweet for employers, the DOL did try to add a couple sprinkles on top.  After receiving  tens of thousands of comments in protest, the agency reduced the proposed salary threshold from $50,440 (the $47,476 figure is based on the 40th percentile of salaries for full time workers  in the Southern United States, the  region with the lowest average wages). DOL also agreed to allow bonuses and commissions to be included in the calculation, and extended the effective date form 90 to 180 days  to give employers more time to prepare.   The Rule further makes no changes to the “duties test” that a worker must meet to qualify for the exemption.

Because the rule becomes effective in six months, employers should take the time to determine if they need to re-classify employees, change employee salaries, or take other measures to comply with the rule.  And let Joe enjoy his double scoop.

 

 

 

No Comments
prev next
Email Updates

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Loading