This week the Wage and Hour Division of the U.S. Department of Labor (DOL) released its long-awaited Final Rulehttps://www.dol.gov/WHD/overtime/final2016/ regarding changes to the regulations governing who is an executive, administrative, professional, or highly-compensated employee under the Fair Labor Standards Act.
In addition to the Final Rule, the Department has also issued a Fact Sheet summarizing the regulation. The Final Rule will:
· Raise the salary threshold from $455/week to $913/week ($47,476 per year). This is the equivalent of the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South.
· Permit non-discretionary bonuses and incentive payments (including commissions) to account for up to 10 percent of the new required salary level.
· Raise the salary level of the “highly compensated employee” to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004.
· Automatically update the salary thresholds 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.
· Require NO change in the current Duties Tests.
· Permit NO carve-out for colleges and universities, but these entities will be given options to avoid paying overtime under the current FLSA regulations. (See DOL release guidance aimed at higher education)
· Institute a non-enforcement policy related to organizations that serve people with disabilities. (See DOL release guidance targeted at nonprofits)
· Reinforces prior DOL guidance on Comp time and the required notices to employees (see DOL guidance targeted to state and local governments)
The effective date of the new regulation is December 1, 2016. Earlier this year, DOL officials had called for an effective date 60 days after issuance.
Common Sense Counsel: the above summary is from the Constangy Brooks Smith & Prophete, LLP, client bulletin drafted by my Boston law partner Ellen Kearns. We will hold webinars on the new Final Rule and will issue follow-up bulletins as we continue to analyze the Rule. The key decision for Human Resources departments and management is whether to raise the salaries of currently exempt employees to $47,476, or to reclassify those employees to non-exempt status. If you are going to reclassify, you will need to determine the regular rate of pay for these employees in order to determine the proper overtime rate. This will require careful planning and consideration of a number of issues, not the least of which is how many hours of overtime are expected to be worked each week by the involved employee.
Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at firstname.lastname@example.org or 334-246-2901. Blog at www.alabamaatwork.com with Links to worksheet and regulations on Blog. Send an email to email@example.com if you wish to be placed on the free Constangy newsletter list.