The new rule is expected to prompt employers to reclassify more than a million currently exempt workers to nonexempt status and raise pay for others above the new threshold.
The U.S. Department of Labor released the final rules on increasing the minimum salary level for the Fair Labor Standards Act (FLSA). In a fact sheet released the DOL, the revised regulations will allow 1.3 million workers to become newly entitled to overtime by updating the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements.
Key Provisions of the Final Rule
The final rule updates the salary and compensation levels needed for workers to be exempt:
- Raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
- Raising the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year;
- Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
- Revising the special salary levels for workers in U.S. territories and in the motion picture industry.
Additionally, the Department intends to update the standard salary and HCEs total annual compensation levels more regularly in the future through notice-and-comment rulemaking.
Next Steps: Review Job Classifications and Descriptions
Employers should query their data to identify exempt workers earning below the threshold and weigh the costs of raising employee salaries above the new threshold against the cost of reclassifying employees as nonexempt and paying overtime.
However, salary is only one piece of the puzzle. Employers should also look at job descriptions to make sure they are compliant with what are commonly called the white-collar exemptions.
The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. They are exempt if they are employed in a bona fide executive, administrative, or professional (EAP) capacity, as those terms are defined in the Department of Labor’s regulations at 29 CFR part 541.
BerganKDV has a team of workforce management professionals who can help ensure you have the right systems in place to help you easily and accurately track your employee data and to make sure you remain in compliance with changes in state and federal labor laws. Start here.
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