The Department of Labor’s (DOL’s) final rule on the overtime regulations under the Fair Labor Standards Act (FLSA) was issued on May 18th. The rule included an exempt employee threshold of $47,476, less than the proposed rules $50,440, but slightly more than double the old threshold of $23,660.
The rule included an increase every three years in the minimum salary for exempt employees. The automatic increase will be based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest-wage census region, the South. This rule must be complied with by December 1, 2016.
What does this mean to Employers?
1. The impact will be significant. Employees and employers across every industry and sector will be impacted. Most employers covered by the FLSA will need to analyze employee classifications and make changes by December 1, 2016.
2. The salary level has increased. Currently, to qualify as exempt from the FLSA, employees must make more than $455/week or $23,660/year. The DOL has approved the salary threshold to $47,476. While this change will impact all industry sectors, it will disproportionately impact the nonprofit, government and service-sector industries, as well as certain geographic areas.
3. The new regulations included changes for highly compensated employees (HCEs). It raised the salary threshold level for the highly compensated employees exemption from $100,000 to $134,004, or the 90th percentile of full-time salaried workers nationally. Like the standard salary level for the white-collar exemptions, the highly compensated employees exemption salary level will increase every three years, beginning Jan. 1, 2020.
4. State law application will need to be considered. Employers in states with wage and hour laws that are more restrictive than the FLSA in their application (for example, California) will need to review coverage requirements under federal law in light of these changes.
5. Workplace flexibility may be reduced. The DOL changes will require employers to reclassify a significant number of employees from exempt to nonexempt status. Employers should analyze the need to track hours worked and the resulting impact on workplace flexibility.
BCI Group is here to help! If you have any questions, feel free to contact us.