The U.S. Department of Labor has issued its long-awaited final rule increasing the salary basis requirements for exempt employees under the Fair Labor Standards Act (FLSA). The final rule is available here and a fact sheet emphasizing its key points is available here.
Here are the primary points that employers need to know about the new rule:
- The new rule will take effect on December 1, 2016.
- In order for most employees to qualify as exempt under the FLSA, the employee will need to be paid at least $913 per week on a salary or fee basis. This amounts to a salary of $47,476 per year.
- Employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid quarterly or more frequently to satisfy up to 10% of the new salary requirements.
- In order for an employee to qualify for the highly compensated employee exemption under the FLSA, the employee must earn at least $134,004 per year, including payment of at least $913 per week on a salary or fee basis (not including nondiscretionary bonuses, incentive payments, or commissions).
- The DOL will update these new salary requirements every three years, beginning on January 1, 2020.
Takeaway: The DOL’s new salary basis rule is one of the most significant changes to employment law in many years. Employers should start planning now to ensure they will be in compliance when the new rule takes effect on December 1, 2016.