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Quick Takeaways for Employers on the New DOL White Collar Exemption Regulations


For the first time since 2004, the Department of Labor updated its regulations defining the white collar exemptions under the Fair Labor Standards Act (FLSA). By way of background, certain groups of “white collar” employees are exempt from both the FLSA’s overtime and minimum wage requirements. These “white collar” exemptions can be categorized by the executive exemption, the administrative exemption, the professional exemption, and the outside sales employee exemption.

An employee is exempt under one of these categories if the employee meets two requirements. The first is referred to the “salary basis test,” or salary threshold, meaning that the employee is paid a true salary, which is currently at least $455 per week. Generally speaking, this employee’s salary has to remain the same, despite the number of days worked.

The second requirement is referred to the “duties test,” meaning that the employee must perform the duties under a particular exemption. For example, to meet the executive exemption, an employee must be compensated on a salary basis of at least $455 per week; his/her primary duty must be managing the business or a department or a division of the business; he/she must “customarily and regularly direct the work of at least two or more other full-time employees or their equivalent;” and he/she must have the authority to hire or fire other employees or his/her recommendations must be considered.

Additionally, the new regulations impact employees who fall under the “highly compensated” exemption. These employees are paid a total annual compensation of $100,000 or more on a salary basis; their primary duty includes performing office or non-manual work; and they customarily and regularly perform at least one of the exempt duties of an exempt executive, administrative, or professional employee.

With this in mind, what do you need to know about these new regulations?

The regulations only impact the salary threshold.
The new regulations only impact the salary basis test, not the duties test, which is contrary to what the legal community initially anticipated. The current salary threshold has been $455 per week, as mentioned above. This has been increased to $913 per week, or $47,476 annually. The annual salary threshold for “highly compensated” employees will increase to $134,004.

A portion of the salary threshold can be satisfied via other types of compensation.
Employers will be able to satisfy up to 10 percent of the salary threshold from “nondiscretionary bonuses and incentive payments,” including commissions, paid on a quarterly or more-frequent basis. This particular provision is not permitted as to the salaries of employees who are treated as exempt as “highly compensated” employees.

You have some time before these regulations become effective.
The new regulations come into effect on December 1, 2016. In preparation, employers should evaluate their payrolls to see which exempt employees fall on the cusp of the threshold. Employers can consult with their employment counsel regarding how to compensate those employees who fall below that threshold.

These thresholds will be “updated.”
The regulations provide for automatic “updates” every three years, starting January 1, 2020. This means employers will have to examine employees who are on that salary threshold cusp every three years. 
 
Courtney Leyes is an associate attorney at Fisher Phillips. Have questions about a legal or labor and employment matter and how it may affect your business? Contact Fisher Phillips at info@fisherphillips.com





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