May 18, 2016

DOL Issues New Overtime Exemption Rules

The long awaited final rules from the U.S. Department of Labor ("DOL") regarding overtime exemptions under The Fair Labor Standards Act ("FLSA") were released on May 18, 2016, and are effective December 1, 2016.  The good news is that the "duties" tests for the primary overtime exemptions are unchanged by the new rules. The bad news, however, is significant.

It includes:

  • Salary Threshold Doubled to $913/week ($47,476/year).

    The DOL's new rule doubles the minimum salary level for the "white collar" exemptions. Under the prior rule, the executive, administrative and professional exemptions required a salary of $455/week ($23,160/year). The new rules amend the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commission) to satisfy up to 10% of the new salary threshold. The salary threshold automatically increases under the new rule every three (3) years to maintain the salary threshold at the 40th percentile of full-time salaried workers in the lowest wage census region. Employees now considered exempt under the "white collar" exemptions will need to satisfy the new salary threshold by December 1, 2016, or they will lose the exemption.

    Highly Compensated Employee Exemption Increased to $134,004/year.

  • The minimum salary for the "highly compensated" employee exemption was increased by $34,004. Under the old rule, this exemption was available to any employee performing non-manual work who regularly performed at least one of the exempt duties required by the executive, administrative, or professional exemptions, and was paid at least $100,000/year. The new minimum salary for this exemption, like the new salary threshold for the "white collar" exemptions, will automatically increase every three (3) years to remain at the 90th percentile of full-time salaried workers in the lowest wage census region. Similarly, employers may use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the salary threshold.

Employers must review currently exempt positions and determine if action is necessary to preserve the exemptions.  Alternatively, employers need to evaluate how the loss of exempt status will impact workloads, assignments and work schedules. For questions or assistance, please contact us.