Video announcing the new overtime rules, posted by the US DOL.
Video from the US DOL website, promoting the new overtime exemption rules.

Late yesterday the White House and Department of Labor released key details of the new FLSA overtime exemption rules for white collar workers. The final rules themselves have just been released this morning.  We are still digesting 500-plus page final rules, but the key points are as follows:

Effective Date: December 1, 2016. Note that this is a Thursday, so employers will need to make changes for the payroll period in which December 1 falls.

Minimum Salary: $913 per week, or $47,476 annually. This is slightly less than the $970 per week ($50,440 annually) originally proposed, but still more than double the current $455 per week.

Bonuses and Commissions May Now Be Included: In a somewhat surprising concession to employers, the new rules will allow non-discretionary bonuses, incentive payments and commissions to count for up to 10% of the minimum salary, provided these amounts are paid at least quarterly.

Highly Compensated Employees: The minimum salary for employees exempt under the “highly compensated” employee exemption will increase to $134,004 from $100,000.

Automatic Updates: The new minimum salary levels will not update automatically every year as originally proposed, but they will be adjusted every three years beginning January 1, 2020. The salary level will be pegged to the 40th percentile of full-time salaried workers in the lowest-wage Census region. For 2020, the DOL estimates that the minimum will go up to $51,168. The minimum for highly compensated employees will be tied to the 90th percentile of full-time salaried workers in the lowest-wage Census region, which the DOL estimates will be $147,524 in 2020.

Duties Tests: The new rule contains no changes to the existing duties tests.

For our Higher Ed and Non-profit clients and readers, this may not be what you were hoping for in a final rule.  Despite rumors that the rules might contain some carve-outs for higher education institutions and non-profits, this does not appear to be the case. The DOL has published guides for higher education, non-profit and government (all .pdf) employers to help explain how these employers might meet their obligations, but there is no indication of any new exceptions in the rules for these groups.

What is the potential impact of this rule? The DOL estimates that the new rule will result in approximately 35% of all full-time, salaried workers being eligible for overtime based on their salary level alone. It further states that the new rule will affect 4.2 million salaried workers. Of these, the DOL projects that 4.1 million will be re-classified as non-exempt and eligible for overtime, while approximately 100,000 will receive a raise so their salary meets the new threshold. The DOL contends that the rule will result in workers receiving an aggregate pay increase of $1.2 billion per year. Of course, many employer groups dispute that number, pointing out that employers are as likely to cut hours, reduce headcount, or make other changes to avoid increased labor costs.

We will provide more detail and commentary once we have a chance to digest the final rules and materials released by the DOL.

Bloomberg BNA is reporting (subscription required) that according to a “source familiar with the situation,” the DOL’s new overtime exemption rules will take effect on December 1. The new minimum salary for exempt executive, administrative and professional employees will be $913 per week or $47,476 per year. That’s still more than double the current $455 per week, but less than the original proposal which would have boosted the minimum to a projected $970 per week for 2016, or about $50,440 per year.

According to BNA, instead of adjusting annually as previously proposed, the minimum salary will update every three years. We are still waiting for more details on the measure that will be used for this update.

BNA is also reporting that earlier rumors of a carve-out for higher education institutions were not accurate.

We will update this post as further details emerge.

Update: 

Columbus Dispatch reports that Vice President Joe Biden will announce the rules at Jeni’s Splendid Ice Cream headquarters in downtown Columbus, Ohio.

Rumors abound this afternoon that the DOL will release its new overtime exemption rules this Wednesday, May 18, in coordination with an event in Ohio attended by VP Joe Biden and Labor Secretary Thomas Perez. What will the new minimum salary be? Will it be indexed to inflation or some other measure? Will the duties tests change? We’ll know the answers to these questions and more very soon. Probably. Stay tuned everyone!

As employers try to figure out how to cope with the coming increase in the minimum salary for the executive, administrative and professional employees, some find themselves with job classifications where the salary scale straddles the new line between exempt and non-exempt. Can employers in this situation categorize employees whose compensation falls below the line as non-exempt, while treating those with the same job title but with higher salaries as exempt?

In theory, sure. But it could get complicated.

Continue Reading Can We Have Both Exempt and Non-Exempt Employees With The Same Job Title?

No.

I’ve received this question from several blog readers and clients recently, and on its face it makes some sense. After all, you don’t pay full salary to someone who is only working for you part-time, so it only makes sense that the minimum salary for the executive, administrative and professional exemptions under the FLSA should also be pro-rated based on how many hours an employee works. Right?

Well, not so much.

Continue Reading Will The New Minimum Salary Be Pro-Rated for Part-Time Exempt Employees?

According to a report from Bloomberg BNA, unnamed DOL staffers have stated that the salary threshold in the hotly anticipated FLSA exemption rules will be about $47,000 per year, down slightly from the $50,440 level suggested by the proposed rules published last summer. This is  not an official announcement, so while the statement may well be accurate, we suggest waiting until the rules are actually published before employers take any definite action based on the information.

Other final details of the rules, such as whether and how the salary level will be adjusted from year to year, and whether there will be any changes to the “duties” tests for exempt status, also remain unknown.

The final rules are expected to be published within the next few weeks. Stay tuned!

Recently, Uber announced that it agreed to pay drivers in California and Massachusetts $100 million in an effort to ensure that the drivers are considered independent contractors, not employees. In just six years, Uber has expanded from its base in San Francisco to over 300 cities across the world. With more than 450,000 drivers using the company’s app each month in the U.S. alone, a determination that its drivers were misclassified as independent contractors rather than employees could be extremely costly for the ride-sharing company, currently valued at $62.5 billion.

The debate concerning the correct classification for these freelancing drivers has grown in recent months, with drivers in states including Georgia, Pennsylvania, Texas, Florida, and Oregon claiming that they are employees of Uber entitled to the protection of federal and state employment and labor laws. In response to these claims, Uber argues that it simply connects independent drivers with passengers and has no other form of control over drivers who use its service.

Continue Reading Uber Willing to Pay $100 Million to Keep Its Drivers Classified as Independent Contractors

When sexual harassment lawsuits started becoming a major liability issue for employers, many employers sensibly responded by requiring their supervisory employees to go through mandatory anti-harassment training. There is at least some data to suggest that training and other preventive measures have done some good. For example, statistics published on the EEOC’s website (here and here) show a more-or-less steady decline in the number of harassment charges filed with the agency each fiscal year, from a high of 15,889 charges in FY1997 to just 6,822 charges in FY2015.

If sexual harassment lawsuits were the hot topic in employment law a decade or two ago, today it’s wage and hour law. Why? Wage and hour violations don’t require proof of motive or intent. They are easier for plaintiffs to prove, and harder for employers to defend against. The amounts due are often fairly easy to calculate or estimate, and wage and hour violations frequently affect entire classes of employees rather than just individuals. And, unfortunately, the law is deceptively complicated, leading to frequent screw-ups by even well-intentioned employers.

Continue Reading Have You Trained Your Supervisors on Wage & Hour Compliance?

On Tuesday, March 22, 2016, the United States Supreme Court affirmed a $5.8 million dollar judgment against Tyson Foods Inc. in a class and collective action filed by workers claiming uncompensated time donning and doffing time.  Contrary to what many predicated given the trend in class action rulings, the Court upheld the workers reliance on statistical analysis that used average time estimates to determine overtime owed for class recovery. Continue Reading Supreme Court Upholds $5.8 Million Judgment Based on Statistical Analysis

In a move that should surprise precisely no onecapitol-hill-building who has been paying attention to current U.S. politics, GOP lawmakers in the U.S. House and Senate introduced legislation to block the U.S. DOL’s anticipated overtime exemption rules, just two days after the DOL sent the final rule to the Office of Management and Budget. OMB review is typically the final stage before publication of a new rule.

The legislation, dubbed the “Protecting Workplace Advancement and Opportunity Act,” would:

  • Void the DOL’s new rules;
  • Allow the DOL to publish updated rules only after conducting a detailed analysis of the rules’ impact on small business, non-profit and public employers;
  • Bar the DOL from adopting rules that provide for automatic adjustments of the minimum salary level without going through a formal notice and comment rulemaking process;
  • Require any proposed changes to the “duties” tests for the overtime exemptions to be published and subject to public notice and comment.

Continue Reading DOL OT Exemption Rules DOA? Federal Wage Theft Legislation? Probably Not …