The wait is over. The US Department of Labor has released the long-awaited Final Rule modernizing the Fair Labor Standard Act’s (FLSA) white-collar exemptions. The good news, for those who have been following the development of the Final Rule, is that there are no big surprises.
What are the changes?
Expected to require employers to pay overtime to roughly 4.2 million additional US workers, the regulation changes include:
- Increasing the current minimum salary requirement for the executive, administrative, professional and computer employee exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year), with automatic increases every 3 years to the threshold wage level based on the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region (currently the South);
- Increasing the threshold for exemption as a “highly compensated employee” from $100,000 to $134,004, with automatic increases every 3 years to the threshold wage level based on the 90th percentile of weekly earnings for full-time salaried workers; and
- Permitting up to 10% of the standard salary level to come from non-discretionary bonuses, incentive payments, and commissions paid at least quarterly.
The DOL decided not to make any changes to the duties test at this time. Employer groups strongly lobbied the DOL to not make changes to the various duties tests as any changes would have increased compliance costs.
How much time do I have?
The Final Rule goes into effect December 1, 2016, giving employers more than six months to prepare for the changes. However, there is no time for procrastination! The dramatic increase in the salary threshold will require most employers to make some significant changes ensure their organization is compliant.