Posted: July 14, 2016  

The Fair Labor Standards Act (FSLA) provides protections for most employees concerning minimum wages and overtime. Certain employees are known as “exempt” from those standards. Those mainly include executive, administrative and professional employees. There are generally three tests to have this exemption apply:

  1. Salary basis test – pay is predetermined and fixed and not subject to reduction because of variations in quality or quantity of work performed.
  2. Salary level test – salary must meet a minimum specified amount.
  3. Duties test – job duties must primarily involve executive, administrative or professional duties as defined by FLSA regulations.

The new Final Rule, which was published on May 23, 2016 in the Federal Register and goes into effect on December 1, 2016 includes the following updates:

  1. Sets the standard salary level at $913 per week or $47,476 annually.
  2. Sets total annual compensation requirement for highly compensated employees (HCE’s) subject to a minimal duties test at $134,004, and
  3. Establishes an automatic update to salary and compensation levels every three years.

Employers may also use nondiscretionary bonuses to satisfy up to 10% of the new standard salary level.

Many employers may be affected by the inclusion of formerly “exempt” employees now qualifying for overtime pay even though still on salary as well as having new requirements for “non-discrimination” testing.