Dramatic New Overtime Regulations Effective December 1, 2016After two years of anticipation, the Department of Labor has finally published its final rule concerning changes to the Fair Labor Standards Act ("FLSA") overtime provisions, which go into effect on December 1, 2016.
Most notably, the minimum salary for overtime exemptions will increase to $47,476 annually (or $913 per week) and the minimum annual compensation for Highly Compensated Employees will increase to $134,004. The duties tests for "white collar" exemptions will not change, and employers may use non-discretionary bonuses, incentive payments and commissions to satisfy up to 10% of the required salary. The Department of Labor estimates that its final rule will automatically extend overtime pay protections to over 4 million employees nationwide.
The Department of Labor's comparison of the overtime regulations as they currently exist, the prior proposed rule, and the final rule as published are listed below. Future updates to the salary thresholds will occur automatically every three years, beginning on January 1, 2020. You can find the final rule on the Department of Labor's website: https://www.dol.gov/WHD/overtime/final2016/
Comparison of Current Regulations, Proposed Rule, and Final Rule
|Current regulations (2004 until effective date of Final Rule, 2016)||Proposed rule||Final Rule|
|Salary Level||$455 Weekly||$970 weekly (if finalized as proposed) |
40th percentile of full-time salaried workers nationally.
|$913 weekly |
40th percentile of full-time salaried workers in the lowest-wage Census region (currently the South)
|Highly Compensated Employees Total Annual Compensation Level||$100,000 annually||$122,148 |
90th percentile of full-time salaried workers nationally
90th Percentail of full-time salaried workers nationally
|Automatic Adjusting||None||Annually with requests for comment on a Consumer Price index or percentile basis||Every 3 years, maintaining the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage Census region, and the Highly Compensated Employee total annual compensation level at the 90th percentile of full-time salaried workers nationally.|
|Bonuses||No provision to count nondiscretionary bonuses and commissions toward the standard salary level||Request for comment on counting nondiscretionary bonuses and commissions toward standard salary level||Up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly.|
|Standard Duties Test||No specific changes proposed to the standard duties test. Request for comment on whether the duties tests are working as intended.||No changes to the standard duties test.|