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[Source: Bob Evnen, Woods & Aitken LLP, 07.2016 | Keywords: DOL, Employment Policies, Overtime]

Recently, the U.S. Department of Labor Wage and Hour Division (DOL) released the highly anticipated
final rule amending the Fair Labor Standards Act (FLSA) overtime pay regulations. The newly released rule consists of 496 pages of explanatory preambleÖand 12 pages of regulatory amendments. The nuts and bolts of what you need to know about the momentous changes contained within the rule are as follows:

1. The new rule is effective December 1, 2016. You must act now to implement any necessary changes prior to the effective date.

2. Under the FLSA, unless specifically exempted, employees must receive overtime pay for all time worked in excess of 40 hours in a workweek at a rate of not less than one and one-half times their regular rate of pay. Specific exemptions include the “white collar” exemptions.

3. Under the “white-collar” exemptions, employees may be exempted from the overtime pay requirement if they satisfy three tests: salary level, salary basis and duties test. Currently, the minimum salary level is $455 per week ($23,600 per year). The new rule raises the minimum salary level to $913 per week ($47,476 per year). Thus, under the new rule, employees earning less than $913 per week must be classified as non-exempt and must be paid overtime for all time worked in excess of 40 hours in a workweek. The new salary level is based on the 40th percentile of full-time salaried workers in the lowest-paid Census region (currently the South).

4. Under the new rule, the minimum salary level for white-collar exemptions will automatically update every three years by maintaining the earning percentile described above in paragraph 3.

5. Under the new rule, up to 10 percent of the minimum salary level for white-collar exemptions can come from non-discretionary bonuses, incentive payments and commissions, if paid at least quarterly.

6. The new rule does not make any changes to the duties test for white-collar exemptions.

Possible approaches to managing changes under the new rule include: increasing exempt employees’ pay to satisfy the new salary threshold; initiating a fluctuating week pay plan; hiring additional employees to alleviate the need for current employees to work overtime; and/or converting salaried employees to hourly pay. Our practice group is available to assist you with the selection and application of the appropriate approach for your workplace. Woods & Aitken LLP will announce webinar dates on the new final rule soon.

If you have any questions on this topic or need assistance, please contact our I-NEDA Human Resources Helpline at 855.277.5575.