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New Overtime Rule Issued for White Collar Workers


May 23, 2016 by Paul Sullivan
Category: FLSA

New Overtime Rule Issued for White Collar Workers

Note: The new FLSA final overtime rules were scheduled to go into effect December 1, 2016. However, a federal district court has issued a nationwide preliminary injunction against implementation of the rules. Implementation, if it happens at all, must await further hearings and action by the court. See our New FLSA Overtime Rules Put on Hold blog post.

The US Department of Labor (DOL) issued today (5/23/2016) its final rule that changes the “salary test” used to determine whether executive, administrative, and professional (“white collar”) employees are subject to the Fair Labor Standards Act (FLSA) requirements for overtime pay. The final rule differs somewhat from the rule proposed in July 2015 and discussed in the MRSC blog post, New FLSA Regulations Proposed Regarding Who is Subject to Overtime, which provides useful background information on the new rule. The final rule becomes effective on December 1, 2016.

The final rule focuses primarily on updating the salary and compensation levels needed for white collar employees to be FLSA-exempt. Specifically, the final rule:

  • Raises the salary threshold to qualify to be exempt from FLSA overtime requirements to $47,476 annually, or $913 per week. This is up from the current salary threshold of $23,660 per year ($455 per week), but slightly down from the $50,440 per year ($970 per week) threshold in the proposed rule. The threshold is set at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South.
  • Raises the annual compensation threshold for the “highly compensated employees” exemption from $100,000 to $134,004. This level, which is higher than the $122,148 threshold in the proposed rule, is set at the annual equivalent of the 90th percentile of full-time salaried workers nationally.
  • Provides for automatically updating the salary and compensation levels every three years. The updates will adjust the salary threshold levels based on the above percentiles. The proposed rules called for annual updates.

Additionally, the final rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the new salary level.

Significantly, the final rule makes no changes to the duties tests for the white collar exemptions to apply.

For more information on the final rule, see:

For general information and links to further information on the FLSA, see our Fair Labor Standards Act webpage.

Have a question or comment about this information? Let me know below or contact me directly at psullivan@mrsc.org.

About Paul Sullivan

Paul has worked with local governments since 1974 and has authored MRSC publications on local elections, ordinances, and general local government operation. He also provides training on the Open Public Meetings Act.

VIEW ALL POSTS BY Paul Sullivan

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