New Overtime Rules Effective December 1, 2016 - Got Compliance?

Last year the Department of Labor (DOL) announced proposed changes to the Fair Labor Standards Act (FLSA), the law which outlines overtime exemptions for workers. These proposed changes extended overtime protections to nearly five million workers making many positons previously considered overtime exempt under the act, nonexempt and eligible for overtime. After 10 months of review, the final rule was published May 18, 2016.

Overview
The final rule focuses on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the rule:

• Changes the standard salary level from $455 per week or $23,660 annually to $913 per week or $47,476 annually; meaning that employees must make at minimum the standard salary level to be classified as exempt.
• Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to $134,004.
• Establishes a mechanism for automatically updating the salary and compensation levels every three years to align with cost of living etc.
• Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Employers have until December 1, 2016 to comply with the final rule. This means that in order to be exempt from overtime, employees must make a minimum salary of $47,476 and satisfy the duties test outlined by the DOL for exemption from overtime (see table below). Employees who do not meet this criteria must be classified as nonexempt and paid overtime for any hours worked over 40 hours per week.

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