On May 18, 2016 the Department of Labor issued a new rule that updates the regulations determining which white-collar, salaried employees are entitled to the Fair Labor Standards Act’s minimum wage and overtime pay protections

Key Provisions of the Final Rule

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:

1.      Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);

2.      Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and

3.      Establishes a mechanism for automatically updating the salary and compensation levels 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.

Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The effective date of the final rule is December 1, 2016.

What actions should you take?

  • Review employee classifications to ensure your “exempt” employees are properly classified.  Use the report you will be receiving from us within the next 30 days that will list all of your exempt employees.
  • Identify which employees meet the administrative, professional, or executive exemption and currently earn less than the new minimum of $47,476. We will provide you a template for you to determine who truly meets the “white collar” exemption.
  • Determine appropriate course of action.