On Tuesday, May 18, 2016 the U.S. Department of Labor issued its Final Overtime Rule, which focuses primarily on updating the salary and compensation levels required for employees who are overtime exempt because they fall into the federal Fair Labor Standards Act (“FLSA”) “white collar” exemptions. Previously, employees had to meet job duties tests and be paid on a salary basis to be exempt from minimum wage and overtime requirements for executive, administrative, professional, outside sales, and computer employees. Under the new Rule, the tests have not changed but the salary levels have.
President Obama had signed a Presidential Memorandum directing the Department of Labor to update the rules defining and delimiting the exemptions under the FLSA in 2014. A comment period was open from July 2015 to September 2015 and the Department of Labor received over 270,000 comments and feedback used to shape the Final Rule.
In a release by the White House, President Obama stated that overtime protections have not kept pace with the times. The President noted, “Today just 7 percent of workers qualify for overtime pay based on their salaries. Compare that with 1975, when more than 60 percent of workers qualified for overtime based on their salaries.”
The Obama Administration argued that people who work more than 40 hours a week should be paid more for that extra time. And, that this money would allow employees to better support their families, strengthen the middle class, and help grow the economy.
The Final Overtime Rule doubles the salary threshold and automatically updates it every three years based on a 40th percentile benchmark of full-time salaried workers reported by the lowest-wage Census Region. Specifically, employees who make less than $913 per week or $47,476 annually will be entitled to overtime premium pay. Additionally, highly compensated employees (HCE) subject to a minimal duties test who make less than $134,004 annually may be entitled to overtime premium pay. And, for the first time, the new Rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The Rule will not take effect until December 1, 2016.
From July, 2015: Department of Labor Proposed Rule Changes Could Affect 5 Million Workers Nationwide
