Department of Labor Releases Final Rule Regarding Overtime Exemptions under the Fair Labor Standards Act

DOLRecently, the Department of Labor (DOL) released its final regulations making changes to Part 541, governing overtime exemptions under the Fair Labor Standards Act (FLSA).

Here are the key elements of the new regulation that you need to know now:

1. Salary Threshold Changed to $913/week ($47,476 per year)
This threshold doubles the current salary threshold level. While this level is slightly lower than the threshold in the proposed rule, it still encompasses many employees that are currently classified as exempt.

2. Automatic Salary Threshold Increases Every 3 Years (Not Annually) to Maintain Level at 40th Percentile in Lowest-Wage Census Region
Automatically updating the salary threshold, however, does not allow the government to take into account changing economic conditions, specific impact on certain industries, or regional differences. It also denies the public the ability to have input on the threshold as required by the regulatory process.

3. Duties Test is Unchanged
DOL did not make changes to the standard duties test.

4. Effective Date is December 1, 2016.
With the rule going into effect on December 1, 2016, employers should review their current workforce immediately to determine which employees are affected, whether to re-classify those employees, and to execute a communications strategy. Employers should keep in mind the periodic adjustments and set a regular review process.

5. Highly Compensated Employee (HCE) Exemption Is now $134,004 per year
The final rule retains the methodology in the proposed rule setting the threshold at the 90th percentile of full-time salaried workers nationally.

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