News & Insights
Brace Yourselves Employers: DOL’s Final Overtime Rule is Upon Us
May 18, 2016
South Bend / Mishawaka, IN – The U.S. Department of Labor has announced the release of its Final Rule (the “Rule”) regarding overtime protections for non-exempt workers under the Fair Labor Standards Act (“FLSA”). The Rule is anticipated to extend overtime protections to some 4.2 million more Americans who are not currently entitled to receive overtime pay under the FLSA. The Federal Government expects the Rule to boost wages for workers by $12 billion over the next ten (10) Years.
Here are the key highlights of the Final Rule:
- The Effective Date is December 1, 2016, which is later than anticipated. Employers will have a bit more time to ready themselves for the changes. Note: December 1, 2016 is a Thursday, so if a salary increase is necessary to continue an employee’s exempt status under the new Rule, the pay increase should be accounted for in the workweek that includes December 1, 2016. Employers should be mindful of their payroll dates/pay cycles.
- The new salary threshold for executive, administrative, and professional “white-collar” exemptions from overtime will be $913/wk or $47,476 annually. This is at the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region, currently the South. The DOL had originally proposed a salary threshold of an estimated $50,440.
- Up to 10% of the salary level can be met with nondiscretionary bonuses and commissions. Such payments may include, for example, nondiscretionary incentive bonuses tied to productivity and profitability (the key there for employers being nondiscretionary). For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the new salary threshold level, the Rule requires that such payments be made on a quarterly or more frequent basis. The DOL’s Rule also indicates that employers will be able to make a “catch-up” payment in this regard, but it is unclear at this time what the Rule means by that.
- Future automatic increases to the salary threshold will occur every three (3) years, beginning on January 1, 2020. Like the new salary threshold, the automatic increases will be tied to the 40th percentile of weekly earnings of full-time salaried workers where the salary level is the lowest (traditionally the South). The DOL will publish all updated salary levels at least 150 days before their effective date(s).
- Although there was much fanfare over the past year, no changes to the duties tests are included in the Rule. Neither are there any changes to the computer professional exemption (aside from the new salary threshold).
- The new salary threshold for employers to avail themselves of the highly-compensated employee (HCE) provision of the exemptions is $134,004 per year. To be exempt from overtime as an HCE, an employee must also receive at least the new standard salary amount of $913/wk on a salary or fee basis and pass a minimal duties test.
More information will be available when the entire Final Rule is published. At the time of this publication, May Oberfell Lorber is only aware of the DOL’s announcement of the Final Rule’s release.
The content of this article is for informational purposes only, and does not contain, nor should be construed as containing, legal advice.
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