The Department of Labor (DOL) released its final regulations making drastic changes to overtime exemptions under the Fair Labor Standards Act (FLSA). These changes will present considerable challenges to any employer that has employees they pay as Salary.

Here are some key elements of the new regulation that you need to know now:

1. Salary Threshold Changes to $913/week ($47,476 per Year)

This threshold doubles the current salary threshold level, and it encompasses many employees that are currently classified as exempt. Look at who you are currently paying a “Salary” of anything less than $913 a week, $1,826 bi-weekly, $1,978.17 semi-monthly or $47,476.00 annually. These employees will either need to be raised to this dollar amount, or CHANGED TO AN HOURLY EMPLOYEE – subject to overtime pay.

2. Automatic Salary Threshold Increases Every 3 Years (Not Annually) to Maintain Level at 40th Percentile in Lowest-Wage Census Region

The DOL has added an automatic threshold that 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. That means that come December 2019 (I know, a long way off), the dollar amount will most likely increase again.

3. Duties Test is Unchanged

The DOL did not make changes to the standard duties test. The duties test is what determines whether an employee is EXEMPT or NON EXEMPT from the FLSA and, therefore, overtime regulations. It has never been whether the employee was an hourly or salaried employee, but rather whether they are exempt or non-exempt based upon their DUTIES. If you are NOT 100% certain, go to this link (Fact Sheet 17A) for further information. Remember, this is showing the “old” salary level.

https://www.dol.gov/whd/overtime/fs17a_overview.htm

4. Effective Date is December 1, 2016.

With the rule going into effect on December 1, 2016, business owners and 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. You should keep in mind the periodic adjustments and set a regular review process.

5. 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.