The Department of Labor (DOL) issued its final overtime rule which becomes effective December 1, 2016.  In this final rule, the DOL revises final regulations under the Fair Labor Standards Act (FLSA) implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees.  These exemptions are frequently referred to as the Employee Assistance Program (EAP) or “white collar” exemptions.  To be considered exempt, employees must meet certain minimum requirements related to their primary job duties and must be paid on a salary basis at not less than the minimum amounts specified in the regulations.

The final rule updates the standard salary level and total annual compensation requirements to more effectively distinguish between overtime-eligible white collar employees and those who may be exempt, thereby making the exemption easier for employers and employees to understand and ensuring that the FLSA’s intended overtime protections are fully implemented.

The final rule includes the following:

(1) Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;

(2) Sets the total annual compensation requirement for highly compensated employees (subject to a minimal duties test) to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and

(3) 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 non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

These new overtime rules can be quite confusing so make sure you understand them if you have these types of employees in your company.  The link for the final rule above also contains contact information for DOL folks that can help you.