DOL Issues Overtime Final Rule

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This week the U.S. Department of Labor (DOL) issued the final overtime rule which implements President Obama’s 2014 Memorandum directing the agency to modernize overtime regulations to reflect the original intent of the Fair Labor Standards Act (FLSA). The final rule also simplifies the regulations to make them easier for workers and businesses to understand and apply. The new rule becomes effective December 1, 2016.

The final rule updates the salary and compensation levels at which white collar workers are considered exempt. Under the final rule, the weekly salary threshold increases from $455 to $913. This ensures protections for approximately 4.2 million workers. This threshold will be updated every three years based on wage growth over time. The final rule does not, however, make any changes to the duties test for executive, administrative and professional employees.

The rule also raises the salary threshold for “highly compensated employee” to $134,004 annually. This upper threshold was designed to ease the burden on employers when identifying overtime-eligible employees, since it’s more likely that workers whose earnings exceed the threshold perform the types of job duties that would make them exempt from overtime requirements.

Ultimately this is a change to the “white collar” exemption to the FLSA minimum wage and overtime pay requirements, and promotes higher take-home pay, allowing workers to achieve better balance between work and family obligations.