New Overtime Regulations: Employers Face a Dramatic Increase in Minimum Salary Requirement for Major Exemptions

Posted on: May 25th, 2016

The new minimum salary level for the executive, administrative, and professional employee exemptions under the Fair Labor Standards Act (FLSA) will be $913 per week, or $47,476 per year, under final regulations that will be released on Wednesday, May 18, 2016, by the U.S. Department of Labor (DOL). This new salary threshold—which will become effective on December 1, 2016—more than doubles the current minimum salary level of $455 per week, or $23,660 per year, and will have a dramatic impact on employers.  What does this mean?  Employees who are currently considered “salary exempt” and are not tracking hours/being paid overtime for hours worked over 40/workweek need to be paid at least $47,476 annually to stay that way (starting December 1, 2016).
The new salary requirements will apply to the FLSA’s executive, administrative, and professional exemptions. Employees who do not meet the new salary requirements when the final regulations become effective will no longer qualify for one of these exemptions, which means they will have to be paid overtime compensation when they work more than 40 hours in a workweek.
Other major highlights from the final regulations include the following:

  • For the first time, employers will be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level, as long as those payments are made on a quarterly or more frequent basis.
  • The total compensation requirement to qualify for the highly compensated employee (HCE) exemption will increase from $100,000 per year to $134,004 per year, which is based on the 90th percentile of earnings for full-time salaried workers in the United States, without regard to regional differences.

Notably, the DOL did not make any changes to the duties tests for any of the exemptions.

Please see the Overtime Factsheet for more information.