DOL Announces Publication of Final Rule Amending FLSA Salary Test
Yesterday, the Department of Labor (DOL) announced the final rule amending the salary and compensation levels for most executive, administrative and professional workers to maintain exempt status. The rule (as generally summarized in the DOL fact sheet):
- 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, which is $913 per week or $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, which is $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.
- 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 Final Rule will be effective December 1, 2016, meaning 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 apply on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.
You can access the DOL fact sheet by clicking here.
Given the timing of publication, any challenges to the new regulation in the House and Senate will likely not succeed. There may be legal challenges presented down the road, but it is time to think about what steps, if any, your company needs to take to comply. If you have questions and are unable to attend the seminar on June 1, do not hesitate to contact us.
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