On May 18, 2016, the Department of Labor published its revisions to the Fair Labor Standards Act’s (“FLSA’s”) Part 541 overtime regulations. The key provisions of the final rule relate to the increase in pay levels for the “white-collar” exemptions (Executive, Administrative and Professional) and for highly compensated employees. The new rules take effect on December 1, 2016. Importantly, the Department of Labor responded to concerns raised by employers, and it did not incorporate any changes to the “duties test” into the final rule. The final rule includes the following changes:
1. The minimum salary level has been adjusted to mark the 40th percentile of earnings of full-time salaried workers in the lowest wage Census region (currently the South): $913 per week; $47,478 annually for a full-year worker. Under the old regulations, the salary level was $455 per week and $23,600 annually.
2. The total compensation requirement for the highly compensated employees (HCE) exemption is adjusted to reflect the 90th percentile of full time salaried workers in the United States, which amounts to $134,004 annually. Under the old regulations, the compensation requirement was $100,000 annually.
3. The total compensation requirement for the HCE exemption and the minimum salary level will both be adjusted every three (3) years to track their respective percentiles.
4. The salary basis test has been amended to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The updated regulations will be published in the Federal Register on May 23, 2016. As the changes do not become effective until December 1, 2016, employers have just over 6 months to make changes necessary to comply with the new requirements. Effected employers have several options available to them from providing salary increases to employees to maintain the exemption to adjusting employees’ hours and duties to avoid overtime pay for those employees who may no longer be exempt. Carlson Dash has experienced employment attorneys to assist employers throughout this process.
This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
C. Douglas Moran| Employment, Litigation: Complex Commercial, Real Estate and Bankruptcy
Doug’s practice focuses on providing employers with advice and counsel in employment-related matters, and representing employers, corporations and banks in litigation, including complex litigation. If you need assistance with a related matter, contact Doug.