Idaho Law Blog
Nearly everyone with a hand in employment law is familiar that a change to the Fair Labor Standards Act will take place the end of this year which will have an impact on who qualifies to earn overtime pay. This change is known as the “Final Rule”. The Final Rule focuses primarily on updating the salary and compensation levels needed for workers to be exempt from overtime pay.
SUMMARY OF CHANGES
In summary, and according to United Stated Department of Labor “Fact Sheet” the Final Rule:
- Sets a standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. The Final Rule makes no changes to the duties tests.
EFFECTIVE DATE
The effective date of the Final Rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.
WHAT IT ALL MEANS
If you are an employer, and you have any employee who you currently classify as “management” and therefore don’t pay any overtime to, you may need to make some changes. Beginning December 1, 2016, it really won’t matter how you classify your employees. One of the major keys to who you are required to pay overtime to will be based on the annual wages/salary of your employees. If your employees make less than $47,476 per year they will likely qualify for overtime pay. Thus, you will be required to keep time records for these employees to determine whether overtime pay is warranted.
According to the United States Department of Labor, “the Final Rule’s salary level represents the most appropriate line of demarcation between overtime-protected employees and employees who may be exempt.
If you are an employer and you have questions about how the “Final Rule” may affect you, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Employment Law attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Employment Law questions and will help you solve your Idaho Employment Law problems.
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