Just one day after KMA posted a head’s up that an announcement about the Department of Labor’s Fair Labor Standards Act Overtime Regulations was imminent, the DOL has released its final rules concerning changes to Part 541, which governs overtime exemptions under the FLSA.
The effective date of the final rule is December 1, 2016. This means that the initial increases to the standard salary level (from $455 to $913 per week) and highly compensated employees (HCE) total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date.
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:
- 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);
- 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
- 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.