U.S. Department of Labor issues final rule updating overtime regulations

On Wednesday, May 18, 2016, the U.S. Department of Labor (DOL) issued a final rule updating the overtime regulations under the Fair Labor Standards Act (FLSA). 

New salary requirement

The new rule increases the salary threshold for workers to qualify as exempt from overtime. Specifically, employees will have to earn a salary of at least $913 per week ($47,476 annually) in order to be exempt from overtime. This increase more than doubles the prior salary requirement of $455 per week ($23,600 annually).

The new rule also raises the salary threshold for the highly compensated employee exemption. To qualify, an employee will have to earn annual compensation of at least $134,000— a 34% increase from the current threshold of $100,000.

These changes become effective December 1, 2016. Automatic updates to these thresholds will occur every three years beginning January 1, 2020.

No change to the duties test

Significantly, the DOL did not change the duties requirements for any of the exemptions. Employers should nonetheless continue to evaluate the job duties of their workforce to ensure compliance with each of the applicable duties tests.

Coverage

The new rule is expected to extend overtime coverage to over 4 million workers in its first year. Where feasible, employers may consider raising the salaries of certain exempt employees in order to maintain their exemption status.

The new rule will be published in the Federal Register on May 23, 2016. The full text of the rule is available here.