DOL Issues Final Rule on Overtime Regulations
The Department of Labor recently published its final rule updating overtime regulations.
President Obama and Secretary Perez recently announced the publication of the Department of Labor’s (DOL) final rule updating overtime regulations, which will automatically extend overtime pay protections to over four million workers within the first year of implementation. In 2014, President Obama signed a Presidential Memorandum directing the DOL to update the regulations defining which white collar workers are protected by the Fair Labor Standards Act’s (FLSA) minimum wage and overtime standards. The memorandum instructed the department to look for ways to modernize and simplify the regulations while ensuring that the FLSA’s intended overtime protections are fully implemented. The DOL published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on July 6, 2015, (80 FR 38515) and invited interested parties to submit written comments on the proposed rule by September 4, 2015. The department received over 270,000 comments in response to the NPRM from a variety of interested stakeholders. The feedback the department received helped shape 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: 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. In addition, 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% 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. Although the Office of Management and Budget (OMB) has reviewed and approved the final rule, the document has not yet been published in the Federal Register. The final rule that appears in the Federal Register may contain minor formatting differences in accordance with Office of the Federal Register publication requirements.
For more information, visit www.dol.gov.