President’s Letter: DOL Announces New FLSA Rules Are Final

Jennifer Tavares, CEcD, President & CEO

Jennifer Tavares, CEcD, President & CEO


DOL Announces New FLSA Rules Are Final
Rules to go into effect December 1, 2016

New rules proposed by the Obama Administration, which modify the definition of and pay thresholds for exempt employees, are expected to have a massive impact on businesses and non-profit organizations.

Though the Chamber has been discussing these proposed rule changes for many months, we know that they have taken many members by surprise. Below you will find some resources, including a link to the DOL website with the final rule, the key provisions, and a number of links to documents which may be helpful in your specific case (business, non-profit, higher education).

Key Provisions of the Final Rule
The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
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 ($134,004); and
Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The effective date of the final rule is December 1, 2016. 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) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

More about complying with new rules here:
Q & A about rules:
Private Employer Guidance:
Non-Profit Guidance:
Higher Education Guidance: