We know many of you have been waiting for months to hear the DOL’s decision regarding the overtime rule. This morning the DOL announced a Final Rule to update the regulations of the Fair Labor Standards Act (FLSA). The rule will effect millions of previously classified exempt employees in the United States.
The Anthros team is here to help our clients understand how this new rule affects your business and how you can prepare for and address it.
The DOL covers the provisions of the new rule in this Fact Sheet on their website. The Key Provisions are also listed below.
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.
The Final Rule also 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. The initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.
In the coming weeks, many of you will need to review the classifications of your employees to make sure they are correctly classified as exempt or nonexempt.
Anthros will send more information about classification and exemptions in the next few weeks, and keep our clients updated as new details about the regulations become available.
The Anthros team will work closely with our clients to ensure compliance with the new requirements. Please do not hesitate to contact us with questions.
About the Author
Helen Usher is the Director of Benefits at Anthros Inc.