On May 18, 2016, the Department of Labor (DOL) released its final regulations making changes to Part 541 governing overtime exemptions under the Fair Labor Standards Act (FLSA).
Here are the key elements of the new regulation:
- Salary Threshold Changed to $913/week ($47,476 per Year)
This threshold doubles the current salary threshold level. While this level is slightly lower than the threshold in the proposed rule, it still encompasses many employees that are currently classified as exempt. SHRM was disappointed that DOL did not offer a more reasonable increase and set the threshold, as it has in the past, at a level designed to encompass those employees that are clearly not engaged in exempt-type work.
- Automatic Salary Threshold Increases Every 3 Years (Not Annually) to Maintain Level at 40th Percentile in Lowest-Wage Census Region
DOL reduced the frequency of the automatic increases in response to concerns raised by SHRM and others. Instead of annual increases, the threshold will be adjusted every 3 years to maintain the level at the 40th percentile of full-time salaried workers in the lowest-wage Census region (currently the Southeast region). Automatically updating the salary threshold, however, does not allow the government to take into account changing economic conditions, specific impact on certain industries, or regional differences. It also denies the public the ability to have input on the threshold as required by the regulatory process.
- Duties Test is Unchanged
The absence of a duties test change is a significant win for the thousands of SHRM members who expressed concern in this area. DOL did not make changes to the standard duties test.
- Effective Date is December 1, 2016.
SHRM advocated (with the support of HR Florida) for a longer implementation period than the standard 60 days and the final rule provides additional time for employers to prepare. With the rule going into effect on December 1, 2016, HR professionals should review their current workforce immediately to determine which employees are affected, whether to re-classify those employees, and execute a communications strategy. HR should keep in mind the periodic adjustments and set a regular review process.
- Highly Compensated Employee (HCE) Exemption Is Now $134,004 Per Year
The final rule retains the methodology in the proposed rule setting the threshold at the 90th percentile of full-time salaried workers nationally.
While the final rule contains some limited improvements, it is critical for Congress to pass the Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773), which would nullify this rule and require DOL to perform an economic analysis of how changes to overtime regulations will impact nonprofits, small businesses, and employers in other vulnerable industry sectors before issuing a new rule. Visit SHRM’s call to action to quickly and easily send an email to your members of Congress to ask that they cosponsor this important workplace legislation. http://www.advocacy.shrm.org/overtime
Currently the list of cosponsors in Florida includes:
Jeff Miller, District 1
Bill Posey, District 8
Daniel Webster, District 10
Richard Nugent, District 11
David Jolly, District 13
Dennis Ross, District 15
Gus Bilirakis, District 20
If your Member of Congress is not listed here it is absolutely critical that you request that they sign on as a co-sponsor, not just give support to the bill.
Additionally, each of us needs to ask Senator Bill Nelson to provide the bi-partisan support he prides himself on by becoming a cosponsor to S. 2707. Senator Rubio has already signed on as a cosponsor.
If you have any questions, feel free to reach out to Bob McCormack (813-221-7439; firstname.lastname@example.org) or Don Works (407-246-8433; email@example.com) on this important and time sensitive issue.