The President of the United States and the Secretary of Labor walk into a bar, the bar manager says, “What can I get you?” The President says, “how about some overtime on the rocks?” They all have a good laugh and the Final Rule was born.
No joke and slightly more complicated than that, was the two-year process that began in 2014 with the President directing the Department of Labor to update regulations guiding overtime coverage. In 2015, the Department proposed its rulemaking and solicited public comment. 270,000 comments later, the Department went to work.
On May 18th, 2016 the United States Department of Labor announced its Final Rule that increased the salary standards for the executive, administrative, and professional overtime exemptions. (Available at: https://www.dol.gov/WHD/overtime/final2016/). These exemptions are commonly utilized by businesses subject to the FLSA and are often referred to as the “white collar” exemptions. To qualify under one of these exemptions, a test has to be met: the employee has to (1) receive a standard, predetermined salary of (2) at least $455.00 per week, and (3) the employee has to perform certain primary duties. For example, under the executive exemption, if a manager was paid an annual salary of $29,000.00 and had the primary duties of managing the business and supervising two or more fulltime employees, and had the authority to hire and fire employees, that manager would likely be exempt from overtime pay.
Starting December 1st, 2016, the minimum salary threshold increases to $913.00 per week, or $47,476.00 annually. This number is set at the “40th percentile of earnings of full-time salaried workers in the lowest-wage Census region.” The Final Rule, among other things, also creates an automatic-increase mechanism for the minimum salary threshold to increase every three years. Of note, 10% of the new salary requirement may be satisfied by “nondiscretionary bonuses and incentive payments (including commissions).”
As a business owner, you might see these changes and think your payroll is going to double, the sky is falling, you’re going to go out of business, and maybe if you’re lucky you can still get in on that bomb shelter your cousin Glenn was building in his backyard. As an employee, you might look at these changes and think your salary is going to skyrocket and you can now afford that newfangled record player you’ve had your eye on. Neither is likely.
At Council Baradel, we know how your business or your livelihood will be affected by the Final Rule and the accompanying changes. As a result we are well prepared to advise you in your business or career on what you can expect and how to adapt. Over the course of the next several months we will provide blog posts with insight on the compliance options available for businesses, as well as what employees can expect. In the meantime, the attorneys in the employment law practice group at Council Baradel are ready and available to discuss any questions you may have about preparing your business or yourself.