The U.S. Department of Labor has issued the final version of a much-anticipated overtime exemption rule, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act's "white collar" exemption to $47,476 per year.
The final rule was proposed in June 2015 and will broaden federal overtime pay regulations to include more than 4 million more people. The rule will take effect on Dec. 1, 2016.
A proposed version of the rule that was issued last year had set the threshold at an estimated $50,440 per year, but the DOL lowered that figure by about $3,000 in the final version. The salary threshold will be automatically updated every three years to ensure it stays at the 40th percentile benchmark.
Under previous regulations, employees had to meet certain tests related to job duties and be paid at least $455 per week - or $23,660 annually - on a salary basis to be exempt from minimum wage and overtime requirements under the Fair Labor Standards Act exemptions for executive, administrative, professional, outside sales and computer employees.
But the final rule calls for raising that salary level, last updated in 2004, to equal the 40th percentile of weekly earnings for full-time, salaried workers in the nation's lowest income region, bringing the salary to a projected level of $913 per week. That is more than double the current threshold under the FLSA white collar exemptions.
This final rule will have serious implications for all employers, including colleges and universities, nonprofit organizations and small business owners. The most problematic change is a dramatic increase in the amount employees can earn and be considered exempt from overtime pay from $23,660 to $47,476. This will be extraordinarily problematic for many employers to implement.