Department of Labor Sets Final Rule Updating Overtime Regulations
The U.S. Dept. of Labor recently announced their Final Rule updating overtime regulations, which will automatically extend overtime pay. The key provisions of this final rule:
The Final Rule focuses on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt, and
1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census region (the South) to $913/week or $47,476 annually for a full-year worker;
2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to $134,004 (the 90th percentile of full-time salaried workers nationally); and
3. Establishes a mechanism for automatically updating the salary and compensation levels every 3 years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
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% 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/wk) and HCE total annual compensation requirement (from $100,000 to $134,004/year) will be effective on that date. Future automatic updates to those thresholds will occur every 3 years, beginning on January 1, 2020.