Today, the U.S. Department of Labor (DOL) formally issued the final regulations that will increase the required salary an employee must receive to qualify for exempt status under the professional, executive, administrative, and computer exemptions. The new regulations also increase the required salary to qualify for the highly compensated employee (HCE) exemption. The Final Rule has been issued and is scheduled to be published in the Federal Register on Monday, May 23, 2016.
The good news is that these increased salary requirements do not take effect until Dec. 1, 2016. Key Provisions of the Final Rule include:
- The weekly salary required to qualify for the exemptions above (aside from the HCE exemption) will be $913.00 per week ($47,476.00 annually);
- The annual salary required to qualify for the HCE exemption is $134,004.00;
- There is no change to the “duties” tests. The current “duties” tests used to qualify for the professional, executive, administrative, computer, and HCE exemptions have not been revised in the final regulations;
- The Final Rule allows employers to include non-discretionary bonuses and commissions to satisfy up to 10% of the standard salary level; however, for employers to credit nondiscretionary bonuses and incentive payments toward a portion of the salary, the Final Rule requires such payments to be made on a quarterly or more frequent basis and permits employers to make a “catch-up” payment;
- The Final Rule includes a mechanism to automatically update the required standard salary level every 3 years (therefore no further increases will take effect until Jan. 1, 2020). Specifically, the standard salary level for the professional, executive, administrative and computer exemptions will be updated to maintain a threshold equal to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region, and the standard salary level to qualify for the HCE exemption will maintain a threshold equal to the 90th percentile for annual earnings of full-time salaried workers nationally. The DOL will publish updated rates in the Federal Register at least 150 days before their effective date and will post them on the DOL website.
If you have any questions about these changes or any other wage and hour matter, please do not hesitate to contact Karen E. Milner, R. Michael Lowenbaum, Robert S. Seigel, Corey L. Franklin, Christopher M. Sanders, David P. Frenzia, Whitney P. Cooney, or Jamie M. Westbrook.