Department of Labor Finalizes New Overtime Rules for Administrative Staff
In 2014, President Obama signed a Presidential Memorandum directing the Department of Labor (DOL) to change the regulations defining which “white collar” workers are exempt from the Federal Labor Standard Act’s (FLSA’s) minimum wage and overtime (OT) standards. The FLSA’s so-called “white collar exemption” permits employers to not pay OT to certain administrative, executive and professional workers if they earn under the salary threshold amount and if their jobs meet a specified “duties test.” The Home Care Association of America (HCAOA) was one of 270,000 entities that submitted comments to the DOL regarding the proposed rule. Right at Home also voiced their concern about the impact on administrative staff in home care offices during HCAOA’s Congressional Lobby Day.
On May 18, 2016, President Obama and DOL Secretary Perez announced the publication of the DOL’s final rule which expands minimum wage and OT pay and record keeping requirements to include certain executive, administrative and professional employees if their annual salary is less than $47,476 ($913/week). This more than doubles the current $23,660/year ($455/week) salary threshold level. The final rule does not change the duties test.
Specifically, the new rule:
- Sets the salary threshold for the exemption from OT at the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region (currently the South). It is currently$913/week ($47,476/year).
- Provides that the salary threshold will be automatically adjusted every three years so the dollar amount reflects the 40th percentile of the lowest-wage Census Region. This inflation adjustment will begin in 2020.
- Allows employers to use non-discretionary bonus and incentive payments (including commissions) to satisfy up to 10 percent of the new salary threshold.
- Establishes a separate salary threshold for highly compensated employees at the 90th percentile of full-time workers nationally. The 90th percentile currently is $134,004.
If you aren’t prepared, then you need to make the determinations regarding what is best for your company and your staff. You may need to consult your account or legal counsel. Failure to abide by these rulings could result huge financial penalties and back wages! You can be prepared!