Today, the federal Department of Labor published its final rules updating the overtime regulations to the federal Fair Labor Standards Act. The rules are expected to extend overtime pay protections to over 4 million workers within the first year. Please note that the final rules are effective December 1, 2016. There is no phase-in of the new salary levels.
The final rules are over 500 pages and primarily focus on updating the salary and compensation levels needed for workers to be classified as exempt under the "White Collar" exemptions-i.e., the executive, administrative and professional exemptions. The key points are:
Minimum Salary: the minimum salary is set at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, which currently is the South Region. Thus, the new minimum salary level would be $913 per week or $47,476 annually.
Highly Compensated Employee Exemption: the minimum salary to be exempt as a "highly compensated employee" is set at the 90th percentile of full-time salaried workers nationally, which is $134,004.
Bonuses and Commissions: the final rules allow employers to use nondiscretionary bonuses, incentive payments, and commissions to satisfy up to 10 percent of the new standard salary level, provided they are paid at least quarterly.
Automatic Updates: the salary and compensation levels will be automatically updated every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
We are planning a seminar soon to discuss the new rules in greater detail and to provide further guidance for employers.
If you have any questions, please contact any member of the Carmody Torrance Sandak & Hennessey Labor and Employment Practice Group for more information.