On May 18, 2016, the U.S. Department of Labor (“DOL”) issued the highly anticipated final overtime rule for white collar workers. The rule was promulgated in response to President Obama’s instruction to the DOL in 2014, which directed the agency to update the regulations surrounding the exemption from overtime pay for executive, administrative, and professional employees. The key changes made by the new rule include:
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Establishing an adjustable weekly salary threshold for exempt employees based on the 40th percentile of full-time salaries workers in the lowest-wage Census region, rather than the previous fixed weekly salary.
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The new weekly salary threshold for white collar employees is set at $913 per week, an increase from $455 per week.
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Establishing an adjustable annual salary threshold for highly compensated employees based on the 90th percentile of full-time salaried workers nationally.
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The new annual compensation threshold for highly compensated employees is $134,004, an increase from $100,000 annually.
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Automatic adjustments to the weekly salary and annual compensation threshold levels.
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The thresholds will automatically adjust to meet the required standards every three years, beginning on January 1, 2020.
No updates were made to the duties test, which requires that the employee’s job duties primarily consist of executive, administrative, or professional duties as defined by DOL regulations.
Congress still has an opportunity to overturn the new rule. Under the Congressional Review Act, Congress may issue a “joint resolution of disapproval” within 60 days, which would nullify the rule. However, the President has veto power over any such joint resolution by Congress.
If Congress does not take nullification action before July 17, 2016, the new rule will go into effect on December 1, 2016. This gives employers approximately six months to make the necessary adjustments to their employee classifications and payrolls. For more information on the new rule, see the DOL’s fact sheet, found here.
