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LB4HR – FLSA Regulations Update – May 2016

Posted on May 20, 2016

They’re here . . .

Despite an outpouring of negative commentary from the business community and a Congressional attempt to block enactment (more on that below), the DOL’s WHD Final Rule “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees” is here.  The White House issued an email last night, announcing that publication of the Rule would occur today.  And it did.  The rule is a whopping 508 pages long, but here are the basics gleaned from the summaries:

  • Effective date is December 1, 2016 . . . you’ve got some time to get your house in order.
  • The minimum salary needed to preserve most exemptions (in addition to meeting the proper duties test) will rise from $23,660 to $47,476 per year (lower than expected, based on the proposed reg).
  • The minimum salary needed to preserve the Highly Compensated Employee (HCE) exemption will rise from $100,000 to $134,004 per year (higher than expected, based on the proposed reg).
  • The minimum salary will reset every three years, starting on January 1, 2020.  The new minimum will be announced 150 days in advance (on August 1, 2019 for the January 2020 increase).
  • Those minimum salary levels are tied to a percentage of the earnings of full-time salaried workers in the lowest-earning Census region, the South, which is comprised of AR, LA, OK, TX, AL, KY, MS, TN, DE, DC, FL, GA, MD, NC, SC, VA and WV. The non-HCE minimum salary is pegged at the 40% mark when looking at the weekly earnings of all full-time, salaried workers in the South census area.  The HCE rate is pegged at 90%.
  • Up to 10% of the salary minimum for non-HCE workers can be met via payment of non-discretionary bonuses, commissions or incentive pay so long as the payments are made quarterly or more frequently.
  • No changes were made to any of the duties tests.

The administration purposefully pushed the reg out now, to try to avoid nullification via the Congressional Review Act after the upcoming elections.  The Protecting Workplace Advancement and Opportunity Act, which attempts to block the reg and requires further economic impact study, has 36 sponsors in the Senate (S. 2707) and 155 in the House (H.R. 4773) so not a lot of traction there yet.  Time to review those job classifications and your compensation levels and make some decisions.  Do you increase the minimum salary, where needed, to preserve the exemption?  Or do you concede nonexempt status and manage the overtime liability by clamping down on hours worked?  Policies and procedures will need updating and plan on educating newly nonexempt workers and their managers on unfamiliar topics such as proper record-keeping, compensability of travel time and more.

More details to follow, once I get through reading all 508 pages.  Oh joy.

Audrey E. Mross

Labor & Employment Attorney

Munck Wilson Mandala, LLP

972.628.3661 (direct)

972.628.3616 (fax)

214.868.3033 (cell)

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