The U.S. Department of Labor (DoL) has updated its final rules regarding minimum wage and overtime pay protections for the Fair Labor Standard Act (FLSA) “white collar” workers. White collar workers include executive, administrative and professional employees (EAP).
The updated rules will go into effect on December 1, 2016.
What is the FLSA?
The FLSA prescribes standards for minimum wage, overtime pay, recordkeeping, and youth employment, and it affects most private and public sectors. It requires employers to pay employees at least the federal minimum wage and time-and-a-half (150%) in overtime pay. There are exceptions to this rule (see below).
Current FLSA Rules
The FLSA provides an exemption from minimum wage and overtime pay requirements for white collar employees if they meet the following requirements:
- The employee must be paid a predetermined salary that is not subject to reduction based on quality of quantity of work.
- The amount of the predetermined salary must not be lower than $455 per week or $23,660 per year.
- The employee’s job duties must fall under the “white collar” category, which includes executive, administrative, or professional duties. (Job title is irrelevant – only actual duties count towards this requirement.)
- “Highly-compensated employees” (HCEs) have their own requirements in order to be deemed exempt – they must be paid a total annual compensation of $100,000 or more.
New FLSA Rules
The FLSA new rules have not made any drastic changes to the current laws, but even their small changes need to be noted carefully.
- The predetermined salary must now be at least $913 per week or $47,476 per year.
- Employers can use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% of the new standard salary level, as long as these amounts are paid on at least a quarterly basis.
- HCEs now need to be paid $134,004 annually in order to merit the exemption.
- A mechanism for automatically updating salary and compensation levels every three years will be built into place, and will go into effect on January 1, 2020.
- The definition of “white collar” workers has not changed, nor have their duties.
If you want to make sure that your company is in compliance with FLSA standards, feel free to contact us today.