White House Increases Overtime Eligibility:
May 23, 2016
On May 18, 2016, President Obama and Secretary Perez announced the publication of the U.S. Labor Department’s final rule updating the overtime regulations and minimum-wage requirements. As an employer, if you presently consider any of your employees to be exempt “white collar” employees, you may have to make some sweeping changes.
A brief summary of the changes that will be made in the U.S Labor Department’s definitions of executive, administrative, professional, computer-employee, and highly compensated exemptions under the FLSA's Section 13(a)(1):
- The minimum salary threshold is increasing to $913 per week, (up from $455 per week) which annualizes to $47,476.
- Employers will be able to satisfy up to 10% of this new threshold through nondiscretionary bonuses and other incentive payments, including commissions, provided that the payments are made at least quarterly.
- The total-annual-compensation threshold for the “highly compensated employee” exemption will increase from $100,000 to $134,004.
- Establishes a mechanism for automatically updating the salary and compensation levels every three years and to ensure that they continue to provide useful and effective tests for exemption.
The effective date of the final rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020. The U.S. Labor Department estimates that the law will qualify 4.2 million U.S. employees for overtime eligibility. The new rule does not make changes to the “duties test,” the amount of work necessary to be identified as an executive, administrative or professional to sustain exempt status from overtime.
Right now, as an employer, you should be analyzing whether the requirements for the “white collar” exemptions you have been relying upon are met and developing FLSA-compliant pay plans for employees who have been treated as exempt but who no longer will be.
If you have any questions about these new regulations or how they might affect your company, please contact Zachary Silverstein, David McComb or Grace Flanagan.