Final Rule: Overtime
Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees under the Fair Labor Standards Act
The final ruling was announced on May 18, 2016, by President Obama and Secretary Perez regarding overtime regulations. In brief, the final rule centers on updating the compensation levels for Executive, Administrative and Professional workers who are classified as exempt. The changes are effective December 1, 2016. The link below provides a summary of the changes.
Key take aways from this post are:
Provisions of the Final Rule
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally.
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.