US Department of Labor Issues Final Rule on FLSA Overtime
Counties should audit pertinent job positions to ensure compliance by Dec. 1, 2016.
May 20, 2016
The United States Department of Labor (DOL) has released its final revisions to rules governing overtime pay (specifically, modifying the weekly salary and annual compensation threshold levels for white collar exemptions to Fair Labor Standards Act (FLSA) overtime requirements), a story CSAC highlighted last August. Compliance with the new regulations is required beginning December 1, 2016. CSAC submitted comments on the proposed rule in September.
FLSA was created in 1938 and established the 40-hour work week, federal minimum wage and the “time and a half” pay rate for work performed over the 40-hour work week threshold. Employers are currently provided with three exemptions from the overtime pay requirement for the following employees: 1) those paid $455/week and above, 2) those paid on a salary basis and, 3) those that perform exempt job duties (executive, administrative or professional, or “EAP” duties).
Today’s final rule makes the following updates to the salary and compensation levels needed for EAP workers to be exempt under FLSA overtime rules:
- Increases the total compensation needed to exempt highly compensated employees from $100,000 annually to $134,004 annually.
- Doubles the weekly salary threshold level for exemption from $455/week ($23,600 annually) to $913/week ($47,476 annually).
- Creates a mechanism to auto update salaries and compensation levels every three years, beginning January 1, 2020.
The final rule does not contain changes to the FLSA duties test as DOL believes that the standard salary level set in the rule and the automatic updating provision will be effective with the current duties test in determining whether workers are exempt or not. However, the final rule does state that employers can now use nondiscretionary bonuses and incentive payments made on a quarterly or more frequent basis to satisfy up to ten percent of the new standard salary level.
Public agencies are being advised to audit all exempt job positions and, should exempt positions fall below or close to below the new levels, either increase the salary for the position to maintain its exempt status or convert the job position to a non-exempt status that will qualify for overtime. If the exempt positions involve your represented employees, the decision to make these changes could require you to meet and confer with the affected employee organizations regarding the impacts of the decision.
Final Rule (unpublished)
Please contact Faith Conley, CSAC Legislative Representative at 916.650.8117 with any questions.