After months of speculation, the United States Department of Labor (DOL) Wage and Hour Division announced the final regulation updates to the so-called “white collar” exemptions in the Fair Labor Standards Act (FLSA). Employees who meet the duties and salary requirements set forth in the white collar regulations are exempt from both the minimum wage and overtime provisions of the FLSA. The new regulations will take effect on December 1, 2016.
Although there was considerable uncertainty as to what changes the DOL might make to the white collar rules, the only change the agency made was to the minimum salary level that an employee must be paid in order to qualify for the exemption. No changes were made to the duties test. The current minimum yearly salary level to qualify is $23,660 per year ($100,000 for certain highly compensated employees). Under the new rules, the minimum annual salary will be $47,476 ($134,004 for highly compensated employees). This is slightly lower than the government had initially suggested when it published proposed regulations in July 2015. Employers will also be able to include non-discretionary bonuses and incentive pay in meeting up to 10 percent of the salary level test so long as those bonuses and payments are made at least quarterly. In the past, the minimum salary figure to meet the white collar exemption was adjusted only when the DOL saw fit to revise it. Under the new rules, the minimum salary will be adjusted every three years to equal the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region (90th percentile for highly compensated employees). Additional information surrounding the new rules can be found on the DOL’s website here. Most employers have been evaluating how they might comply with the new white collar regulations for more than ten months. Now that we know where the line has been drawn, employers can begin the process of either adjusting pay levels to ensure future compliance or evaluating how employees earning less than $47,476 will be paid and how they will be compensated for overtime hours worked. If you have questions or need assistance in understanding or complying with these new regulations, or with any other FLSA issues, please contact any member of Warner Norcross & Judd’s Labor and Employment Practice Group.