New Department of Labor Rules Changes Affect Employers With Exempt Employees

Department of LaborA new Department of Labor Rules change may affect small employers.

The Department of Labor (“DOL”) recently updated the regulations governing the exemption of executive, administrative, and professional (“EAP”) employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (“FLSA”). Employers who classify low-salaried EAP employees as exempt will now have to comply with FLSA overtime regulations and pay such employees time and a half for hours worked over 40 hours in a single work week.

The FLSA ensures minimum wage and overtime pay protections for most employees covered by the Act. However, EAP employees have traditionally been exempt from those protections. DOL regulations require each of three tests to be met for the FLSA’s EAP exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”). The DOL last updated these regulations in 2004, when it set the salary level test at $23,660 annually.

The new DOL Rules, which go into effect on December 1, 2016, update the standard exempt salary level at the 40th percentile of earnings of full-time salaried workers, which is $47,476 annually for a full-year worker. Additionally, the new Rules 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 new Rules do not change any of the existing job duty requirements to qualify for exemption. As a result of the change to the salary level, the number of workers for whom employers must apply the duties test to determine exempt status is reduced.

If you have questions about how the Department of Labor Rules change might affect your business, call Meehle Law at 407-792-0790.

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