News & Training
Final FLSA White Collar Exemption Rules Announced
Today the Department of Labor announced the new salary threshold for certain employees to qualify as exempt from minimum wage and overtime under the Fair Labor Standards Act’s White Collar Exemptions.
Federal Law Alert – May 18, 2016
Effective December 1, 2016, the new minimum salary level will be $47,476 per year ($913 per week). Up to 10% of this income may come in the form of non-discretionary bonuses, incentive pay, or commissions, as long as that portion of the compensation is paid at least quarterly. In the event that an employee does not earn enough in bonuses and commissions to meet the full minimum salary requirement, a catch-up payment can be made by the employer once a quarter.
The minimum salary requirement applies to all white-collar workers who are classified as exempt executive or administrative employees, and to many who are classified as exempt professional employees. As anticipated, the duties tests for the White Collar Exemptions have not changed.
Under the new rules, this salary threshold will increase every three years. It will be set at the 40th percentile of weekly earnings among full-time salaried (not necessarily exempt) employees in the country’s lowest-income region – currently the South. It is expected that the next change, which will be effective January 1, 2020, will increase the minimum salary to approximately $51,168.
The new rule also increases the minimum salary threshold for the Highly Compensated Employee (HCE) exemption from $100,000 per year to $134,004 per year. This exemption can be used when an employee carries out a limited number of executive, administrative, or professional duties, but is very well-compensated. The new rule sets the HCE threshold at the 90th percentile of all full-time salaried workers nationally. This number will also increase every three years, and is expected to rise to approximately $147,524 on January 1, 2020.
Some state laws create different minimum salary levels. When state laws differ from the FLSA, an employer must comply with the standard most beneficial to employees. Presently, the federal minimum salary level is higher than any state-mandated minimum, and therefore must be followed.
In preparation for the new rule, we have created the following materials, all of which can be found in the HR Support Center:
- FLSA Changes: Decision-Making Guide
- FLSA Changes: Implementation Guide
- 2 Minute HR training on the new rule, the executive, administrative, and professional exemptions, and the salaried non-exempt classification
- A memo requesting that employees track their hours for planning purposes
- A letter to employees regarding their classification change
- A guide to calculating overtime for non-exempt employees who receive non-discretionary bonuses or commissions
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Andrew Gale – Incorporation Attorney
Attorney at Law Offices 1820 West Orangewood Avenue, Suite 104a, Orange, CA 92868 Office: +1 (714) 634-4838. I provide legal advice, counseling and related services to entrepreneurs including the formation and management of their corporations and estate plans.
My Law Office is based in Orange County California and I have practiced law for 30 years. I have given advice to more than 1000 small business owners on the best ways to set up a company, what types of business entities (corporations, limited liability companies, partnerships) are best suited for them and their small business, how to legally run the business to protect their assets and how to successfully transfer the business to family or key employees through the proper use of estate planning and trusts.
