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New Federal Overtime Rule Effective December 1
by Gregg Kennerly | Published Wednesday, November 9, 2016
Effective December 1, a new rule updates the regulations governing which executive, administrative, professional, and highly compensated employees are entitled to the minimum wage and overtime pay protections of the federal Fair Labor Standards Act (FLSA).
The current federal rules provide an exemption from both the minimum wage and overtime pay requirements of the FLSA for bona fide executive, administrative, and professional employees who meet certain tests regarding their job duties and who are paid on a salary basis at not less than $455 per week ($23,660 per year). “Highly compensated employees” (HCEs) who are paid total annual compensation of $100,000 or more and meet certain other conditions are also deemed exempt.
The new rule updates the salary and compensation levels needed for executive, administrative, professional, and highly compensated employees to be exempt. In particular, the final rule:
- Raises the salary threshold from $455 a week to $913 per week (or $47,476 annually) for a full-year worker;
- Increases the HCE total annual compensation level to $134,004 annually;
- Amends the regulations to allow employers to use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% of the new standard salary level, so long as employers pay those amounts on a quarterly or more frequent basis; and
- Establishes a mechanism for automatically updating the salary and compensation levels every 3 years, beginning on January 1, 2020.
Note: When both the FLSA and a state law apply, the employee is entitled to the most favorable provisions of each law.
Our Fair Labor Standards Act section features additional information on exemptions from the law’s minimum wage and overtime requirements.