The U.S. Department of Labor (DOL) has finalized long-awaited regulations doubling the minimum salary level that an employee must be paid to qualify for an exemption from the federal overtime requirements of the Fair Labor Standards Act (FLSA). This important development will operate to convert millions of mid-level, salaried FLSA-exempt positions into hourly, non-exempt, overtime-eligible positions.
Here is what SKO clients need to know now about these new regulations:
- The minimum salary level required for the most popular FLSA overtime exemptions will increase to $47,476 per year. Currently, an employee must be paid a minimum salary of $23,660 ($455 per week) to qualify for a FLSA overtime exemption. Under the new regulations, this minimum salary level has been doubled to $47,476 per year ($913 per week) for the frequently used executive, administrative and professional exemptions. So, if an employee’s annual salary is less than $47,476 per year, his or her position will likely have to be converted to hourly, overtime-eligible status. Bonuses and commission payments will be allowed to count towards a maximum of ten percent of this threshold.
- The minimum salary level for these FLSA overtime exemptions will automatically increase every three years to match national wage growth. The DOL has projected - based on current compensation trends - that the minimum salary level will rise to $51,000 upon its first update in 2020.
- The “duties tests” for FLSA overtime exemptions will not change. In addition to a minimum salary, most FLSA overtime exemptions also require an employee to perform certain types of duties. While the DOL considered changing these “duties tests,” it ultimately decided not to do so at this time.
- The new regulations will be effective December 1, 2016. The DOL initially considered providing 60 days for businesses to come into compliance; fortunately, it was persuaded to provide over six months advance notice.