Increase in salary threshold for exempt employees is effective Dec. 1

As many employer may already be aware on May 18 the wage and hour divisions of the United States Department of Labor released its long awaited final rule regarding changes to the regulations governing who is an executive, administrative, professional or highly compensated employee under the Fair Labor Standards Act.

These regulations affect employees who are classified as exempt under the Fair Labor Standards Act. The federal Fair Labor Standards Act requires that in addition to paying at least the minimum wage, employers also must pay overtime to employees who work more than 40 hours in a given workweek, unless they meet certain exceptions. Employees that fall within these legally defined exceptions are exempt from the minimum wage and overtime requirements.

In addition to the final rule, the department also has issued a fact sheet summarizing the regulation. Below is a brief summary of the final rule:

▪  Raise the salary threshold from $455 a week to $913 a week (or $47,476 a 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 nondiscretionary bonuses and incentive payments (including commissions) to account for up to 10 percent of the new required salary level.

▪  Raise the compensation 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 and compensation thresholds every three years to maintain the levels at the above percentiles.

▪  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.

▪  Institute a non-enforcement policy related to organizations that serve people with disabilities.

The effective date of the new regulation is Dec. 1.

Of course, this information is merely a summary of the new regulations, and employers are encouraged to seek legal advice to assess how these changes will affect their business.

If you would like more information on wage and hour laws or how to conduct a wage and hour audit, please contact an employment lawyer of your choice.

This story was originally published May 24, 2016 at 6:58 PM with the headline "Increase in salary threshold for exempt employees is effective Dec. 1."