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DOL Issues Much Anticipated Update to FLSA Overtime Rules

The employer community has been anxiously awaiting the U.S. Department of Labor’s (DOL) publication of the Final Rule updating the Fair Labor Standards Act (FLSA) overtime regulations. Last night, May 17, 2016, the DOL issued the Final Rule, which takes effect on December 1, 2016. Below are highlights of the Final Rule:

  • The salary basis test, which sets the minimum salary level that must be paid to an employee for the employee to be exempt from the FLSA overtime requirements, has been increased from $23,660 to $47,476 a year, or from $455 to $913 a week. The $47,476 a year threshold is less than the salary basis threshold in the proposed rule.
  • The salary basis test will be updated every three years. The DOL projects that the salary basis threshold will increase to more than $51,000 with the first update on January 1, 2020.  This appears to assume an inflation factor of about 2.5% per year.
  • The highly compensated employee threshold has been increased from $100,000 to $134,004 a year.
  • There are no changes to the duties tests. The duties test outlines that an employee’s job duties must primarily involve executive, administrative, or professional duties as defined in the regulations for an employee to be exempt under the FLSA overtime requirements.

It is important to remember that both the salary basis test and the duties test must be met for an employee to be considered exempt from the FLSA overtime requirements.

Please watch for our in-depth review of the Final Rule in the coming days.

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