Last July, I published a blog entry concerning the push by President Obama and the DOL to raise the existing threshold for overtime. On Wednesday, May 18, 2016, the DOL issued the Final Rule which, according to the DOL, updates and modernizes the overtime regulations governing the exemptions of executive, administrative and professional employees from the minimum wage and overtime pay protections of the FLSA. The DOL also issued the “Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees” which summarizes the Final Rule.
Among the key provisions:
Effective Date : December 1, 2016.
Key Provisions of the Final Rule: The Fact Sheet sets forth the following Key Provisions of the Final Rule:
The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Practice pointers. Employers who have exempt employees making less than $913 per week/$47,476 annually will need begin planning now, if you have not already done so, to make sure you are in compliance with the new OT Rule which becomes effective on December 1, 2016. The new Rule will have a major impact on restaurants, hotels, retailers and other industries that currently have relatively low paid exempt managers. There are many strategies available to ensure compliance, including increasing the salary of those employees, converting the employees from exempt to non-exempt, or using non-discretionary bonuses to account for up to 10% of the standard salary level. The Final Rule issued by the DOL is complex, and employers should consult with their legal counsel to ensure compliance. Over the past several years, there has been a focus by the DOL and private attorneys on filing lawsuits alleging violations of the FLSA as it pertains to overtime. I anticipate that there will be increased focus on the new Final Rule starting on December 1. Employers should start planning now so you can be in compliance on December 1: it is only 6 months away.