On May 18, 2016, the U.S. Department of Labor published its Final Rule updating the Fair Labor Standards Act (“FLSA”) overtime regulations regarding the executive, administrative and professional exemptions (the “FLSA White Collar Exemptions”). The Final Rule does not make any changes to the outside sales or computer professional exemptions.

The Final Rule:

  • Sets the minimum salary level for FLSA White Collar Exemptions at $913 per week ($47,476 annualized) – up from the current $455 per week ($23,660 annualized), but down from the proposed $970 per week ($50,440 annualized);
  • Sets the total compensation level for highly compensated employees (HCE) at $134,004 annually – up from the current $100,000;
  • Provides for automatic increases in the salary levels every three years (beginning January 1, 2020) – with the minimum salary level indexed to the 40th percentile of salaries for full-time workers in the lowest wage census region (currently the south region), and the HCE level indexed to the 90th percentile of salaries for national full-time salary workers; and
  • Allows employers to count nondiscretionary bonuses and other incentive payments, including commissions, paid on at least a quarterly basis, for up to 10% of the minimum salary level.

Importantly, the Final Rule DOES NOT:

  • Make any additional changes to the “salary basis” test for the FLSA White Collar Exemptions, other than increasing the salary level as noted above;
  • Make changes to any of the “duties tests” for the FLSA White Collar Exemptions; or
  • Eliminate the “concurrent duties” test currently in place for the FLSA White Collar Exemptions.

Importantly, the Final Rule will not become effective until December 1, 2016, meaning employers will have approximately 200 days to prepare for, implement any changes resulting from, and comply with, the new regulations.

Littler will soon publish a more robust Insight article that will provide a detailed discussion and analysis of the Final Rule. In addition, Littler will conduct a complimentary webinar on the Final Rule on Thursday, May 19; Friday, May 20; and Monday, May 23. Click here for more information.

The Final Rule is expected to be formally introduced later today by the DOL at approximately 2:30 p.m. EST at a press conference in Ohio featuring Vice President Joe Biden, Labor Secretary Thomas Perez, and Senator Sherrod Brown.