The U.S. Department of Labor announced on May 18, 2016, the publication of the Department’s final rule updating the salary requirements for the so-called “white collar” – executive, administrative and professional – exemptions. While the official release of the new rule has not yet been published in the Federal Register, here is what we know:
- Salary level will increase. The new guaranteed salary level will be $913 per week ($47,476 annually). This is lower than the $970 per week in the proposed rule.
- Salary levels will update every three years. The Department will update the guaranteed salary levels every three years (instead of yearly) on January 1 to match the 40th percentile of full-time salaried workers in the lowest wage Census region (currently the South). The next planned adjustment will come on January 1, 2020.
- Highly Compensated Employee Exemption. Currently, any employee that performs one exempt duty and is paid $100,000 annually is exempt. The final rule raises the salary level to $134,004 (the 90th percentile of full-time salaried workers nationally). This level will adjust every three years, as well.
- Bonuses may count. Up to 10% of the new salary requirement may be met with non-discretionary bonuses, incentive payments and commissions, as long as these are paid at least quarterly.
- No change to duties tests. The final rule did not make any changes to the duties tests for exemption.
- Effective date. The new pay rules go in to effect December 1, 2016. For employers with workweeks that will span either side of the deadline, the change must be in place for the beginning of the workweek that includes December 1, 2016.
We will issue a more detailed article after the text of the final rule is released in the Federal Register. Meanwhile, if you have questions about the application of the new salary rules please call one of our employment attorneys.