In May 2016, the Department of Labor (DOL) announced its Overtime Final Rule updating the “White Collar Exemptions” to overtime payment regulations as required by the Fair Labor Standards Act (FLSA). The DOL estimates that these updates will extend overtime and protections to more than 80,000 Hoosiers and more than 4.2 million Americans. This will create a significant change for many employers.
The new regulations go into effect December 1, 2016.
Salary Threshold for Exempt Employees:
The Overtime Final Rule increases the salary threshold for the White Collar Exemptions for overtime from $23,660 to $47,476. This means that starting December 1, employees are only exempt from the overtime requirements of the FLSA if: 1) they are paid on a salary basis at a rate of not less than $913 each week; and 2) their duties fit within the duties test for executive, administrative or professional employees. If an employee is not exempt, he or she must be paid overtime (at the rate of time and a half) for all hours worked over 40 in one week.
Employees affected by the changes are those who are currently classified as exempt executive, administrative or professional employees, and making an annual salary between $23,660 and $47,476.
Future Increases in Salary Threshold:
Under the new rule, the salary threshold will increase every three years to match the wage of the 40th percentile of full-time salaried workers in the region with the lowest income (currently the Southeast United States). The DOL estimates that the White Collar Exemptions salary threshold will be increased to $51,168 on January 1, 2020.
Nondiscretionary Bonuses:
The rule now permits employers to fulfill up to 10% of the employee’s salary with the payment of nondiscretionary bonuses, incentives, and commissions that are paid quarterly or more frequently.
Employer Action:
Employers should consult with legal counsel about the potential consequences of the new regulations and the steps to take before they go into effect on December 1, to determine the best approach for the employer to implement the required changes into their workforce in a manner that will best serve the employer and its employees.
More information is available at:
Department of Labor – The Overtime Rule
The full text of the new regulations can be found here.
Lawsuit Challenging:
On September 20, 2016, 21 states, including Indiana, filed a lawsuit challenging the new rules. A collection of more than 50 business groups, led by the U.S. Chamber of Commerce, filed suit the same day. The suits were filed in federal court in the Eastern District of Texas. There is the possibility that the court would issue an injunction to prevent the rule from going into effect December 1, but it seems unlikely that these lawsuits will have any effect. Employers should plan to implement any necessary changes by the December 1 deadline.
Contact us for advice on the best way for your organization to comply with the new regulations. We are also happy to speak with or present to any organization that wants to better understand its obligations.
Information on Employment Law Lawyers at B&R:
B&R Business Services Landing Page
About the Author:
Kate is an associate at Bunger & Robertson and focuses her practice on employment and health care related issues. Bunger & Robertson is a full service law firm that has been serving Bloomington and Southern Indiana for nearly 70 years.
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