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DOL Issues Final Rule on Overtime Pay

Wednesday, May 25, 2016

(North American Meat Institute)

The Department of Labor (DOL) last week issued its final rule updating overtime pay. The final rule will increase the standard salary threshold from $455 per week to $913 per week, totaling $47,476 for a full-year worker. The final rule also updates the Highly Compensated Employees (HCE) exception salary level from $100,000 to $134,004 per year.

According to a provision in the final rule, the salary threshold will be automatically updated every three years beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region. The HCE threshold will also be automatically raised every three years, and new salary levels will be posted 150 days in advance of their effective date, beginning August 1, 2019.

Under the final rule, up to 10 percent of the salary threshold for non-HCE employees may be met by non-discretionary bonuses, incentive pay or commissions, provided these payments are made on at least a quarterly basis. Exempt employees who do not qualify for these bonuses, and therefore fall below the salary threshold, could then be entitled to overtime for hours already worked.

The final rule, however, does not make changes to the "duties test" of the Fair Labor Standards Act. Absent a stronger state law requirement, the test continues to require that an exempt employee's principal job duty be the performance of managerial or general business work.

The final rule becomes effective December 1, 2016.

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