The DOL finally issued its final rule governing overtime pay. Among other things, the final rule increases the minimum annual salary for an exempt employee to $47,476 per year from $23,660. The final rule is effective December 1, 2016 unless enjoined or overturned by Congress. Following the effective date, any employee who is covered individually or works for a covered employer who makes less than $47,476 per year will be eligible for overtime pay at time and one-half the individual’s regular hourly rate. The final rule does not change the current exemption classifications available for exempt employees under the Fair Labor Standards Act (“FLSA”). The final rule also provides for an increase in the minimum salary for exempt employees every three years. The increase will raise the minimum salary to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020. Under the new rule, an employer’s ability to use incentive compensation plans will be limited to ten percent of the employee’s salary.
The final rule deviated from the proposed rule as the proposed rule provided for increases annually and a minimum salary of $50,440 per year.
Employers should review their pay practices, job classifications and prepare an analysis regarding their entire workforce by pay classification now and prepare an implementation strategy to include how the changes will be communicated to staff. Questions regarding whether your business is a covered employer or whether any employees of your business are individually covered under the FLSA should be referred to employment counsel. Keep in mind that most businesses are covered as are the employees.
A note to the reader: This article is intended to provide general information and is not intended to be a substitute for competent legal advice. Competent legal counsel should be consulted if you have questions regarding compliance with the law.