Effective December 1, 2016

The U.S. Department of Labor has updated the Fair Labor Standards Act (“FLSA”) overtime regulations for executive, administrative and professional exemptions. The Final Rule does not make any changes to the outside sales or computer professional exemptions.  California employers must apply the overtime rules that are more protective to the employee.

Bottom line – you MUST examine salary level of ALL EXEMPT EMPLOYEES now, and determine if changes must be made December 1^st.

The Final Rule:

• Sets the minimum salary level for FLSA Exemptions at $913 per week ($47,476 annualized) – up from the current $455 per week ($23,660 annualized);
• Sets the total compensation level for highly compensated employees at $134,004 annually – up from the current $100,000;
• Provides for automatic increases for salary levels every 3 years (beginning January 1, 2020); and
• Allows employers to count nondiscretionary bonuses and other incentive payments, including commissions, paid on at least a quarterly basis, for up to 10% of the minimum salary level.

The Final Rule DOES NOT:

• Make any additional changes to the “salary basis” test for the FLSA White Collar Exemptions, other than increasing the salary level as noted above;
• Make changes to any of the “duties tests” for the FLSA White Collar Exemptions; or
• Eliminate the “concurrent duties” test currently in place for the FLSA White Collar Exemptions.

The Final Rule takes effect on December 1, 2016, which means employers have approximately 30 days to prepare for, implement any changes resulting from, and comply with, the new regulations.

Key Takeaways for Employers:

Employers should identify exempt employees and job positions that currently are paid less than $913 per week or $47,476 per year. For employees currently classified as exempt but whose compensation will not satisfy the new minimum salary threshold, employers must:

• Either:
  • reclassify these employees as nonexempt or
  • raise their salaries to meet the new thresholds;
• determine how to compensate affected employees (e.g., determine what their regular hourly rate will be and whether any of these employees will be paid as salaried nonexempt employees);
• make necessary changes in payroll processing and information technology systems to convert these employees to nonexempt status;
• develop communication plans, including identifying who will communicate the changes to affected employees; and
• monitor employee morale after making these changes.

Employers interested in having the Browning Law Group assist them with preparing for, implementing, updating policies, and ensuring compliance with the new overtime regulations can contact Browning Law Group at 949-234-6266 or [email protected]. For more information about Browning Law Group visit www.BrowningLawGroup.com.