Months ahead of the anticipated July 2016 release, the Department of Labor announced on May 18, 2016 they have finalized the Overtime Rule, changing the dollar amount necessary to be considered an ‘exempt’ employee to $913 a week (or $47,476 per year) for white-collared professionals and $134,004 for HCE (Highly Compensated Employees). In addition to the change in compensation levels, the Final Rule states “up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly.” Given that changes in exemption levels have not changed since 2004, many felt it was time to increase this threshold in order to keep up with the rate of inflation. To prevent further instances of it taking over a decade to increase the exempt level thresholds, the Final Rule also mandates that automatic updates to these dollar amounts will occur every three years, commencing on January 1, 2020.
For further information on how the Final Rule compares to the current regulations and the 2015 Notice of Proposed Rulemaking, the DOL has provided a table on their FAQ page:
With the effective date for the Final Rule being December 1, 2016, the DOL is hoping employers will have enough time to determine how they will implement this within their organization. As this Final Rule is estimated to impact 4.2 million white collar workers, the DOL has responded to employer concerns by offering the following suggested options:
- Pay time-and-a-half for overtime work.
- Raise workers’ salaries above the new threshold.
- Limit workers’ hours to 40 per week.
- Some combination of the above.
All organizations currently covered by the Fair Labor Standards Act (FLSA) are required to abide by this Final Rule, including non-profits, schools, and institutions of higher education. However, there are several provisions for higher education institutions and schools that allow for exemptions to be made, including teachers whose primary duties include “teaching, tutoring, instructing or lecturing” and graduate and undergraduate students “who are engaged in research under a faculty member’s supervision in the course of obtaining a degree.” Administrative personnel such as department heads, academic counselors and advisors that “help run higher education institutions and interact with students outside of the classroom” are “not eligible for overtime if they are paid at least half as much as the entrance salary for teachers at their institution.” One caveat for colleges and universities that are considered a “public agency” is that they can provide compensatory time off instead of paying out overtime wages. The use of compensatory time is also granted to “state, political subdivisions of a state, or interstate governmental agencies” but private companies must pay out on overtime worked.
While the Final Rule won’t be published to the Federal Register until May 23, 2016, you can read the rule here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-11754.pdf
Further breakdown of the Final Rule and what it may mean for you can be found by reading the FAQs provided by the DOL: https://www.dol.gov/whd/overtime/final2016/faq.htm#A1
For a complete overview and summary of the Final Rule, please see the following document: https://www.dol.gov/sites/default/files/overtime-overview.pdf
The DOL has also announced several general information webinars for which employers can register: https://www.dol.gov/whd/overtime/final2016/webinars.htm