WASHINGTON, D.C. — On Wednesday, the U.S. Department of Labor published its final rule updating overtime regulations under the Fair Labor Standards Act (FLSA), which, according to the department, will automatically extend overtime pay protections to more than four million workers within the first year of implementation.
The final rule focuses primarily on updating the salary and compensation levels needed for executive, administrative and professional workers to be exempt. Specifically, the rule does the following:
- Sets the standard 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 subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the final rule amends the salary basis test to allow employers to use non-discretionary 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 Dec. 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 Jan. 1, 2020.
“This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” read the Labor Department’s announcement.
In 2014, President Obama signed a Presidential memorandum directing the department to update the regulations defining which white collar workers are protected by the FLSA’s 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.
Click below to read the full article and find out more about the new overtime regulations:
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