Today, the U.S. Department of Labor issued its much-anticipated final rule changing the regulations for the so-called "white collar” exemptions under the FLSA, and significantly increasing the minimum salary level necessary for employees to be properly classified as exempt executive, administrative, and professional employees.
The final rule and its increased salary requirements will take effect on December 1, 2016. The new regulations will:
- Increase by slightly more than double the minimum salary level for exempt “white collar” employees from $455/week ($23,660/year) to $913/week ($47,476/year);
- Raise the highly compensated employee (“HCE”) threshold from $100,000 to $134,004; and
- Automatically update every three years (1) the minimum salary level to the 40th percentile of full-time salaried workers in the lowest income region of the country; and (2) the HCE threshold to the 90th percentile of full-time salaried workers nationally.
No exception is made for small businesses. The final rule does not make any changes to the duties tests for executive, administrative and professional employees. The final rule also allows for up to 10 percent of the minimum salary level for non-HCE employees to be met by non-discretionary bonuses, incentives, or commissions, if these payments are made on at least a quarterly basis.
As a practical matter, these changes to the “white collar” regulations mean higher wages to employees, higher wage costs for employers, and likely increased exposure and risk to employers in wage and hour cases.
A "pre-publication" version of the final rule can be found here.