Employment Law Updates

White collar changes to the Fair Labor Standards Act.

On May 18, 2016, the U.S. Department of Labor released the final rules regarding changes to the "white collar" exemption to the Fair Labor Standards Act (FLSA), 29 CFR Part 541. The Final Rule primarily focuses on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt from the overtime pay requirements. To that end, the Final Rule:

  • 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 ($913 per week; $47,476 annually for a full-year worker);
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004);
  • 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.
  • Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

These critical changes to the FLSA  take effect December 1, 2016. In anticipation of these changes, however, the Protecting Workplace Advancement and Opportunity Act (PWAOA) (H.R. 4773, S.B. 2707) was introduced on March 17, 2016. The bill remains pending before Congress but, if enacted, voids the changes in overtime regulations and delays any similar efforts from the Department of Labor for at least a year. It also nullifies employees’ rights to bring a cause of action against their employers for failure to comply with the Final Rule.

 Employers should monitor this issue closely and take steps to comply with the DOL’s Final Rule—even though PWAOA is currently pending.

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