The Department of Labor released the final rule updating the overtime regulations which revises the salary test for the “white collar” exemptions to the Fair Labor Standards Act (“FLSA”).
Summary of Final Rule
- Raises the salary threshold for the executive, professional and administrative exemptions from $455 per week to $913 a week ($47,476 for a full year worker). This is the first increase since 2004.
- Raises the salary threshold for automatic exemption as highly compensated employee (“HCE”) from $100,000 per year to $134,004 per year.
- Allows up to 10% of the salary threshold for non HCE employees to be met by non-discretionary bonuses, incentive pay or commissions provided that the payments are made at least quarterly.
- There is no change to the exemption “duties test.” Employee who meet the salary threshold must also meet the current duties test in order to be exempt from overtime regulations.
- The salary threshold will updated every three years and will reflect the salary of the 40th percentile of full time salaried workers in the lowest wage Census region.
The new rule will be effective December 1, 2016.
What This Means for Employees and Employers
Exempt employees who earn less than $47,476 per year will need to be reclassified as non-exempt and paid overtime (time and a half) for all hours worked over 40 in a week, as of December 1, 2016.
