DOL Announces Final FLSA Overtime Regulations

Jason Tremblayby E. Jason Tremblay

This was published as a Feature Story in the June 2016 edition of SubStance Magazine, which is distributed by the Illinois Mechanical & Specialty Contractors Association.

On Wednesday, May 18, 2016, the U.S. Department of Labor’s (DOL) Wage and Hour Division released its final updated FLSA overtime regulations. While some of the changes were expected, there are a number of surprises.

First, the new salary threshold for exempt executive, administrative and professional employees will be $47,476.00 per year (or $913.00 per week). That is more than double the current $455.00 per week but less than the original proposal, which would have boosted the minimum annual salary threshold to over $50,000.00 per year.

Second, the salary basis test has also been amended to clarify that employers may use nondiscretionary bonuses and incentive payments (such as commissions) to satisfy up to 10% of the new salary threshold. This may allow certain employees who do not have an annual salary of at least $47,476.00 to still satisfy one of the overtime exemptions.

Third, in another deviation from the initially proposed regulations, the final regulations require an update of the salary threshold every three years, as opposed to every year, as originally proposed by the DOL.

Fourth, the final regulations also increase the “highly compensated employee” (HCE) exemption to an annual salary threshold of $134,004.00, an upward adjustment from what was anticipated to be an annual threshold of $122,148.00.

Finally, these new regulations will take effect on December 1, 2016, which will provide employers a longer period of time to comply with them, as prior indications were that the final regulations would take effect in July 2016.

In light of the foregoing, all employers must immediately analyze whether current “exempt” employees will satisfy the new FLSA regulations and, if not, develop FLSA-compliant pay plans for employees who have previously been treated as exempt but who will now not be exempt under the new overtime regulations.

Should you have any questions regarding the final FLSA regulations, or should you need assistance complying with the regulations, please do not hesitate to contact E. Jason Tremblay at 312-876-6676 or your designated Arnstein & Lehr LLP attorney.

E. Jason Tremblay is a partner in the Arnstein & Lehr Chicago office. He is the chair of the Employment & Labor Practice Group, as well as a member of the firm’s Litigation Group. Mr. Tremblay focuses his practice in employment and commercial litigation. In the commercial area, he represents parties in a broad range of complex business and tort litigation matters, including matters involving breach of contract, breach of fiduciary duty, fraud, interference with contract, shareholder disputes and insurance coverage. To contact Mr. Tremblay, please email ejtremblay@arnstein.com.

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