Law Office of David Miklas, P.A.

Labor & Employment law - Employers only

SIGNIFICANT CHANGES TO OVERTIME RULES **ALERT - This news article was impacted by the November 22, 2016 Judicial ruling discussed at this link

On May 18, 2016 President Obama and his Secretary for the Department of Labor (DOL) announced that the DOL’s final rule will more than double the salary threshold for workers to meet the white collar exemption. The final rule will become effective on December 1, 2016, giving employers more than six months to prepare. The final rule does not make any changes to the duties test for executive, administrative and professional employees.  

The DOL estimates that this change will result in millions of workers who are salaried and currently exempt from overtime pay, automatically becoming eligible for overtime when they work more than 40 hours. 

The DOL had initially proposed increasing the amount of the guaranteed salary to meet the White Collar exemption to $970 per week ($50,440 annually).  However, the Final Rule had been changed downward and will now entitle most salaried white collar workers earning less than $913 a week ($47,476 a year) to overtime pay.

The Final Rule’s big changes are to the salary threshold. The final rule does not make any changes to the “duties test” that determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay. But fewer employers and workers will have to worry about its application because the higher salary threshold means more workers’ entitlement to overtime pay will be clear just from their salaries. For workers with salaries above the updated salary level, employers will continue to use the same duties test to determine whether or not the worker is entitled to overtime pay.

Key Provisions of the Final Rule

  • The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:

  • Sets the standard salary level to $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 $134,004; and
  • Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the new levels.

  • Additionally, the Final Rule 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.

The effective date of the final rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and highly compensated employee total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

It is uncertain as to whether there will be successful attempts to delay or challenge this new rule through legislation or court action.

** As of November 22, 2016, a successful legal challenge has halted this new DOL change.  Read about it here: FLSA: DOL’s new Salary test will not go into effect December 1

If you would like to discuss your business and how you classify your white collar workers as exempt from the overtime and minimum wage requirements of the FLSA, you can contact the Law Office of David Miklas, P.A. at 1-772-465-5111 or you can email us.

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