Labor Department Issues Final OT Expansion Rule
By: Vin Gurrieri
Law360, New York (May 18, 2016, 8:48 AM ET) -- The U.S. Department of Labor issued the final version of a much-anticipated overtime exemption rule Wednesday, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act's “white collar” exemption to $47,476 per year.
The final rule had been proposed in June 2015 and will broaden federal overtime pay regulations to include more than 4 million more people. The rule will take effect on Dec. 1, 2016.
In total, the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years, according to a fact sheet released by the Obama administration late Tuesday. You can read the fact sheet here.
Under previous regulations, employees had to meet certain tests related to job duties and be paid at least $455 per week — or $23,660 annually — on a salary basis to be exempt from minimum wage and overtime requirements under the Fair Labor Standards Act exemptions for executive, administrative, professional, outside sales and computer employees.
But the final rule calls for raising that salary level, last updated in 2004, to equal the 40th percentile of weekly earnings for full-time, salaried workers in the nation's lowest income region, bringing the salary to a projected level of $913 per week. That is more than double the current threshold under the FLSA white collar exemptions.
Additionally, the salary threshold will be automatically updated every three years to ensure it stays at the 40th percentile benchmark, according to the Obama administration.
The final rule will also raise the overtime eligibility threshold for highly compensated workers from $100,000 to about $134,000.
In its proposal last year, the DOL had asked for input on whether changes should be made to the duties test concerning the white collar exemptions, asking if the agency should eye the California model, where a worker must spend at least 50 percent of his or her time on exempt duties to qualify for an exemption, for inspiration. But the final rule made no changes to that test.
Further, the Obama administration said that employers for the first time will be able to count bonuses and commissions toward as much as 10 percent of the salary threshold. (edited)
Many employers fail to follow federal regulations in regards to overtime, either because they are uninformed or attempting to limit personnel costs. Although the new regulations do not take effect until December 1, 2016, workers should check to see if they are currently being paid properly. If you are paid on a salary basis and feel you should be paid overtime for hours worked over 40 hours per week, we suggest that you evaluate your job duties with the possible exemptions. An overview of the exemptions for administrative, executive, professionals, and computer workers is available here.
If after reading the D.O.L. exemptions, you are not sure if you qualify for overtime pay, please contact Bos & Glazier at (616) 458-6814 or through our website.