On May 17th the Department of Labor (DOL) issued the final regulations modifying the Fair Labor Standards Act (FLSA). This is the first time that the DOL has made changes to the FLSA regulations in almost 11 years.  In particular, the modified FLSA regulations include the following changes: 

  • Sets the salary basis at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South. The salary base was changed from $455 each week to $913 each week ($47,476 annually).
  • Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level.
    • Employees must be paid on a quarterly or more frequent basis.
    • The employer may make quarterly “catch up” payments.
  • 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 (increased from $100,000 to $134,004 annually).
  • Automatically updates the salary and compensation levels every three years to maintain the levels at the above percentiles and ensures that they continue to provide useful and effective tests for exemption (January 1, 2020).

Effective December 1: The 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). In addition, the changes provide for future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020. 

Next Steps 

  • The changes are primarily a financial initiative and do not include any changes to the Duties Test. This is great news! In addition, employers have longer than expected to become compliant. Initially, it was expected that employers would have approximately 60 days to become compliant.  
  • This is a great opportunity for clients to address employees that are on “the bubble” and ensure employees are properly classified under the FLSA. HUB offers a number of resources to assist clients with the complexities of the FLSA regulations and the other myriad of employment laws that impact their business including:
    • ThinkHR
    • HUB HR
    • HUB Human Capital Consulting Practice
  • For complete details, see: https://www.dol.gov/whd/overtime/final2016/index.htm.