On May 18, 2016, President Obama and the Department of Labor announced the final rule updating the Fair Labor Standards Act’s overtime requirements. The primary change contained in the new regulations is to dramatically increase the salary requirement for the white collar exemptions to the minimum wage and overtime requirements of the FLSA. The impact of this change is anticipated to result in up to four million additional American workers being entitled to overtime compensation.
Employers have until December 1, 2016 to revise their pay practices as the new regulations go into effect on this date. The changes provided by the new regulations include:
- Raising the salary threshold for white collar exemptions (executive, administrative, professional, and computer) from $455/week ($23,660 per year) to $913 ($47,476 per year);
- Providing that the pay for the computer exemption only can be paid in the alternative of $27.63 per hour;
- Automatically updating the salary threshold every three years, based on wage growth over time;
- Raising the annual salary for highly compensated employees exemption from $100,000 to $134,004; and
- Amending the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level (up to $91 of the $913 salary). However, this must be paid on at least a quarterly basis.
The revised regulations do not make any changes to the duties basis test for executive, administrative and professional employees. While many had speculated that this would be part of the DOL’s revisions, the DOL has advised that it anticipates that impact of the revisions to salary basis portion of the exemptions to be sufficient to address its objective of modernizing overtime regulations and increasing the number of individuals eligible for overtime pay under the FLSA.
Bottom line – in response to the new regulations, employers have only a few options, (1) increase the salary of exempt employees that satisfy the duties portion of the exemption; (2) reclassify employees as non-exempt and pay these employees overtime; or (3) strictly limit the hours of employees to 40 or less.
For questions regarding overtime regulations or any labor and employment matters, please contact Blalock Walters at 941.748.0100. To reach labor & employment attorney Anne Chapman, please email firstname.lastname@example.org.