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The U.S. Department of Labor releases Final Rules on the Fair Labor Standards Act's overtime exemptions

May 19, 2016

On May 18, 2016, the U.S. Department of Labor (DOL) published its Final Rules on the Fair Labor Standards Act's (FLSA or Act) overtime regulations concerning the exempt status of executive, administrative, and professional employees. The Final Rules will focus on updating the salary-basis test by increasing the salary levels needed to maintain exempt status under the Act. The Final Rules will include the following changes:

  1. The DOL will increase the standard salary level to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, which results in an increase from the current annual salary of $23,660 to $47,476 for a full-year worker (or $913 per week);
  2. The DOL will allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level;
  3. The DOL will increase total annual compensation requirement for highly compensated employees (HCE) to the annual equivalent of the 90th percentile of full-time salaried workers nationally (from $100,000 to $134,004 per year); and
  4. The DOL will automatically update the salary and compensation levels every three years.

The effective date of the Final Rules has been set for December 1, 2016. Employers must ensure that the increases to the standard salary and compensation levels are completed by then. Future automatic updates to the salary and compensation thresholds will occur every three years, beginning on January 1, 2020.

Honigman will offer a free webinar covering the Final Rules to assist employers in understanding these changes. Stay tuned for more details.