DOL Issues Final Overtime Rule
under the FLSA
On May 18, 2016, the U.S. Department of Labor (“DOL”) issued a long-anticipated final rule (the “Overtime Rule”) that affects whether certain employees may be treated as exempt from the minimum wage and overtime pay requirements of the federal Fair Labor Standards Act (“FLSA”). DOL estimates that the new Overtime Rule will extend overtime protections to an additional 4.2 million exempt workers who are not currently eligible.
Summary of Overtime Rule
To be considered exempt under the FLSA, employees classified as executive, administrative, professional,
outside sales and computer employees (“white collar employees”) and highly-compensated employees must meet certain requirements related to their primary job duties and must generally be paid on a salary basis at not less than a specified salary amount. The new Overtime Rule will make the following changes to the exemptions available for white collar employees and highly-compensated employees:
- Employees who meet the duties test for the white collar employee exemption must generally earn at least $913 per week (the equivalent of $47,476 per year) in order to be exempt from minimum wage and overtime pay requirements. This more than doubles the previous salary threshold of $455
per week (the equivalent of $23,660 per year). This amount equals the 40th percentile of earnings of full-time salaried workers in the lowest wage Census region (currently the South).
- Employers are permitted to count nondiscretionary bonuses, incentive payments, and commissions towards up to 10 percent of this salary requirement, provided that these forms of compensation are paid at least quarterly.
- Highly-compensated employees, who are subject to a more minimal duties test to qualify for the exemption, must earn at least $134,004 per year (up from the previous amount of $100,000 per year). This amount equals the 90th percentile of earnings of full-time salaried workers nationally.
- The salary threshold for the white collar employee exemption and the minimum compensation level for highly-compensated employees will automatically update every three years (to maintain the earnings percentiles described above), with the first update to take place on January 1, 2020.
- The Overtime Rule does not make any changes to the duties test for the white collar employee exemption.
- The changes in the Overtime Rule will take effect on December 1, 2016.
CAPLAW is continuing to review the Overtime Rule and accompanying DOL discussion, and will update our website with additional information in the coming weeks. If your CAA has any questions about the applicability of the FLSA to your organization or the impact of the new Overtime Rule, please contact CAPLAW to discuss them with one of our attorneys.