The U.S Department of Labor (DOL) has released a final rule, effective December 1, 2016, to update the regulations governing which executive, administrative, and professional employees are entitled to the federal Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay protections.
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, resulting in a salary level of $913 per week or $47,476 annually for a full-year worker;
– Sets the highly-compensated employees (HCEs) total annual compensation level equal to the 90th percentile of earnings of full-time salaried workers nationally, consistent with the DOL’s original proposal ($134,004 annually);
– Establishes a mechanism for automatically updating the salary and compensation levels every 3 years, beginning on January 1, 2020 (rather than the annual updates as originally proposed); and
– Amends the regulations to allow employers to use non-discretionary bonuses incentives, and commissions to satisfy up to 10% of the new standard salary level, so long as employers pay those amounts on a quarterly or more frequent basis.
In response to the new overtime rule, employers can:
A) Pay time-and-a-half for overtime work.
B) Raise workers’ salaries above the new threshold.
C) Limit workers’ hours to 40 per week.
D) Some combination of the above.
The DOL is not making any changes to the current duties tests. For more information, please refer to the DOL’s website on the final rule, which offers employers comprehensive resources including fact sheets, Q&As, guidance for businesses, and more.