On December 1, 2016, the minimum salary threshold for The Fair Labor Standards Act (FLSA) white-collar exemptions increases to an annual $47,476, which increases the number of employees to whom you must pay overtime if they work more than 40 hours in a week.
In May 2016, the Department of Labor (DOL) published its Final Rule updating the overtime regulations. The Final Rule defines which white collar workers are protected by the minimum wage and overtime standards of the Fair Labor Standards Act.
FLSA is the federal labor law that provides basic workplace protections to most workers in the U.S., and guarantees them at least the federal minimum wage for every hour they work, and overtime is paid at one and a half times their regular rates of pay for hours worked beyond 40 in a single workweek.
Not all employees are affected. For example, the following employees are not affected by the new Final Rule:
- Hourly workers
- Workers with regular workweeks of 40 or fewer hours
- Workers who fail the duties test
- Most highly compensated workers
- Workers who do not engage in interstate commerce
- Workers in states where state laws have higher minimum wage and overtime protections
Willful violators may be prosecuted criminally and fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation.
In this Final Rule, the Department of Labor (DOL) updates the regulations for determining whether white collar salaried employees are exempt from the Fair Labor Standards Act's minimum wage and overtime pay protections.
The exemptions provided by FLSA Section 13(a)(1) apply only to “white collar” employees who meet the salary and duties tests set forth in the Part 541 regulations. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill, and energy.
The Salary Basis Test: The employee must be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
The Salary Level Test: Under this Final Rule, the employee must be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) under this Final Rule.
The Duties Test: The employee primarily performs executive, administrative, or professional duties, as defined in the Department's regulations.