U.S. Department of Labor Is Increasing the Salary Threshold for Overtime Exemptions

California’s public educational entities need to be aware of changes to federal law that will become effective on December 1, 2016.  The U.S. Department of Labor will be publishing its official Final Rule on May 23, 2016, updating the Fair Labor Standards Act (“FLSA”) regulations regarding the executive, administrative and professional exemptions from overtime and minimum-wage requirements.

Under the new regulations, the salary threshold for the executive, administrative and professional exemptions will more than double from the current $455 per week ($23,660 per year for a full-time employee) to a rate of $913 per week ($47,476 per year).  The threshold to utilize the “highly compensated employee” exemption will increase from $100,000 to $134,004.  These rates will be “updated” every three years, beginning on January 1, 2020, with USDOL announcing each change 150 days in advance.  The Department of Labor has not changed (at least not yet) any of the requirements related to the kinds or amounts of work necessary to maintain exempt status, referred to as the “duties test.”

The salary threshold does not apply to teachers or academic administrators.  (29 C.F.R. §§ 541.303(d), 541.204(a)(1).)  However, the foregoing changes could impact other positions maintained by educational entities and the non-profit organizations supporting them.

In anticipation of the December 1, 2016 effective date, public educational entities should analyze the positions now considered to be exempt under the FLSA to determine whether they meet the exemption requirements or changes are needed to maintain the exempt status, and to adapt, if needed, to changes in pay for employees who may not be treated as exempt after December 1.  Our firm is available to answer questions that may arise or to assist with internal audits.

Categories: Labor/Employment

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