U.S. Department of Labor New FLSA Overtime Law Ruling In Effect Dec. 1
Tuesday, November 15, 2016
by CMLS Human Resources Section Council
There are new changes to the United States Department of Labor’s overtime exemption rules and they will become effective on Dec. 1, 2016. The central part of this new legislation is that it will change the current minimum annual salary level based test for the overtime exemption.
The key provisions to this rule per the Department of Labor website include:
- Sets the standard salary 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 (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels 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.
- 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 percent of the new standard salary level provided the bonus or incentive payments are paid on a quarterly or more frequent basis. The rule also allows for an employer to make a “catch-up” payment.
If you have salaried exempt employees that earn less than $47,476 per year, they will be affected by this rule. The steps you need to take now include: Reviewing all employee classifications and ensuring that they are compliant with current FLSA standards and then perform a review of salaried exempt employee annual salary amounts.
For those salaried exempt staff that fall below the new annual baseline salary of $47,476, there are two options to consider:
- Increase their annual base pay to satisfy the requirement.
- Change their FLSA status to Hourly Non-Exempt.
While changing staff positions from Exempt to Non-Exempt is not always an easy decision, utilizing the FLSA duties test clearly outlines why a position is classified Exempt or Non-Exempt from overtime earnings.
The CMLS Human Resources Section Council will continue to provide more information on this important ruling additional changes are made by a new administration. The goal of this council is to utilize and communicate effective human resources strategies, systems, and policies that contribute to the overall success of the member MLSs while meeting the needs of employees, leadership, and other stakeholders.
UPDATE: The FLSA Overtime Law Ruling has been blocked by a federal judge after 21 states filed an emergency motion for a preliminary injunction along with others such as the U.S. Chamber of Commerce. Details: Federal Judge Halts Overtime Rule.