Tuesday night the U.S. Department of Labor (DOL) released the much-awaited final rule to the Fair Labor Standards Act (FLSA) overtime regulations. The new rule will have a profound impact on employers.
EA will host another round of briefings mid-summer and early fall that will explain the new rule and answer your questions on what you need to do.
What does the new rule require?
Salary threshold: The final rule will raise the salary level for the first time since 2004. This increase will go into effect on December 1, 2016.
Standard salary level. The final rule will raise the standard salary threshold to equal the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region, currently the South. This will raise it from $455 a week to $913 a week ($47,476 for a full-year worker). This means that 35 percent of full-time salaried workers will be automatically entitled to overtime, based solely on their salary.
Highly Compensated Employees (HCE) salary level. The rule also updates the total annual compensation level above which most white collar workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year.
Automatic updates: The DOL's final rule will automatically update the salary threshold every three years, beginning January 1, 2020. The HCE threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020.
Bonuses, incentive payments, and commissions: For the first time, the final rule will allow up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis. This is a change from current rules.
Duties test: The final rule does not make any changes to the "duties test" that determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay. For workers with salaries above the updated salary level, employers will continue to use the same duties test to determine whether or not the worker is entitled to overtime pay.
What does the new rule mean to your organization? Contact the offices to address specific questions such as, bonuses, part-timers, etc. Watch for information on upcoming briefings.