The New Department of Labor Overtime Regulations

President Barack Obama and United States Secretary of Labor Thomas Perez announced a new publication by the Department of Labor. This has been a long-awaited publication and will result in a nice economic boost for many workers, as well as help President Obama in his commitment to ensure that every worker is fairly compensated for their work. The new publication details the Department of Labor’s final rule on overtime regulations, which will extend overtime pay protections to over 4 million workers all within the first year of implementation. The new Department of Labor overtime regulations have been highly anticipated by those in the industry.

Signing a Presidential Memorandum in 2014, President Obama directed the Department of Labor to revise regulations on which white collar workers are protected by the Fair Labor Standards Act (FLSA) minimum wage and overtime principles. While the memorandum aligns with the President’s goal “to earn a fair day’s pay for a hard days work”, the Department was instructed to rejuvenate and streamline the regulations while ensuring the FLSAs intended overtime protections are fully enacted.

Last summer, the Department of Labor published a Notice of Proposed Rulemaking (NPRM) in the Federal Register (80 FR 38515) inviting interested parties to submit written comments on the proposed rule. After receiving over 270,000 comments, the feedback was used to help formulate the Final Rule for Executive, Administrative and Professional workers to be exempt.

The Final Rule establishes:

1. 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);
2. The 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); and
3. An instrument 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.
4. The salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The final rule enhancements take effect on December 1, 2016. Also effective on this date are initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year). Automatic updates will occur every three years, beginning on January 1, 2020.

Have questions on the new Department of Labor overtime regulations? Contact KDuncan today. KDuncan & Company LLC (KDC) is a Licensed Certified Public Accounting and Financial Services firm that provides support to agencies of the federal government and government contractors. Learn more about our services.