By Oyvind Wistrom<\/p>\n
The U.S. Department of Labor issued its much-anticipated final overtime exemption rule on May 18, 2016, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act\u2019s (FLSA) \u201cwhite collar\u201d exemptions to $47,476 per year ($913 weekly).\u00a0 The new salary test will apply to all administrative, professional, executive, outside sales and computer employees who are treated as exempt and salaried under the FLSA. \u00a0This new rule will affect approximately 4.2 million U.S. workers who are currently treated as exempt, but who would not satisfy the new salary test under the FLSA.<\/p>\n
The rule has been a long time coming.\u00a0 The first version of the new rule was proposed in June 2015 and drew approximately 300,000 public comments between June and September 2015.\u00a0 That first version of the rule would have more than doubled the salary threshold from $23,660 per year ($455 weekly) to $50,440 per year ($970 weekly).\u00a0 The final rule just issued still doubles the salary threshold, but reduced the proposed salary threshold by approximately $3,000.\u00a0 The rule will take effect on December 1, 2016.<\/p>\n
Under previous regulations, employees had to meet certain tests related to job duties and be paid at least $23,660 per year ($455 weekly) on a salary basis to be exempt from the minimum wage and overtime requirements under the FLSA.\u00a0 While DOL\u2019s final rule raises the salary level significantly, non-discretionary bonuses and incentive payments can now count for up to 10 percent of the new salary level, provided the payments are made at least quarterly.\u00a0 This change has been viewed by some commentators as DOL \u201cthrowing employers a bone\u201d in the final rule.\u00a0 In addition, this new salary threshold will be automatically updated every three years to ensure it stays at the 40th percentile benchmark, according to the Obama administration.\u00a0 The final rule also raises the overtime eligibility threshold for \u201chighly compensated\u201d workers from $100,000 annually to $134,004 annually.<\/p>\n
Employers have a range of options in responding to the updated standard salary level. \u00a0For all employees who are currently treated as exempt under the FLSA\u2019s \u201cwhite collar\u201d exemptions, but who are paid less than $47,476 per year ($913 weekly), the following options exist:<\/p>\n
In determining which course of action to utilize, employers should analyze their workforce and determine which solution best suits their particular needs.\u00a0 For salaried, exempt employees who regularly work overtime and currently earn slightly below the new standard salary level, employers may be best suited to raise the employees\u2019 salaries to the new salary level to retain the \u201cwhite collar\u201d exemption.\u00a0 For employees who rarely or almost never work overtime hours, employers may be best suited to start treating those employees as non-exempt, pay the employees a standard hourly rate, and pay the overtime premium when necessary.<\/p>\n