|New OT Regs: Employers Face a Dramatic Increase in Minimum Salary Requirement for Major Exemptions|
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 —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.
Although this is a huge increase from the current minimum salary level, the new standard actually is lower than the $970 per week figure that had been projected when the DOL’s Wage and Hour Division (WHD) issued its proposed Part 541 regulations in 2015. The WHD had stated in the proposed regulations that it planned to set the new threshold to correspond to the 40th percentile of weekly earnings for full-time salaried workers in the United States based on statistics maintained by the U.S. Bureau of Labor Statistics (BLS). That proposed approach was the subject of much criticism, including the fact that it did not take into account pay differentials among various regions of the country.
Interestingly, in the final regulations, the WHD tied the new minimum salary level to the 40th percentile of all salaried employees in the lowest-wage region of the country’s five Census Regions. Those five regions are the Northeast, the Southeast, the Midwest, the Southwest, and the West. Of the five regions, the Southeast currently has the lowest wages.
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:
Notably, the DOL did not make any changes to the duties tests for any of the exemptions.