The wait is over: Final Rule changing the salary test for four categories of white collar workers released

Jill Jensen-Welch Iowa Wage & Hour Watch Iowa Employment & Labor Law Dickinson Law Des Moines Iowa

Posted on 05/18/2016 at 12:00 AM by Jill Jensen-Welch

Late yesterday, May 17, the Department of Labor, Wage and Hour Division, released materials related to the new Final Rule changing the salary tests on four of the six White Collar Exemptions. The rule itself will be made available to the public today, May 18. It is scheduled to be published in the Federal Register on Monday, May 23. A pre-publication version is available here.

The changes are relatively simple, yet still devastating for many employers, and become effective December 1, 2016.

  1. $47,476/year ($913/week) – This is the new minimum salary threshold for Executive, Administrative, and Professional (EAP) white collar exemptions. This is less than anticipated in the proposed rule.  It is the 40th percentile of full-time salaried workers in the lowest-wage census region (the South), taking into account the geographic concerns raised after the proposed rule issued.  Still, it is more than double the current threshold of $23,660/year ($455/week).
  2. New 10% Rule – For the first time, up to 10% of the minimum salary threshold for the EAP exemptions can be made up of commissions and non-discretionary bonuses.
  3. 3-Year Indexing – Beginning on January 1, 2020, and every three years thereafter, the minimum salary threshold for EAP exemptions will be automatically updated to the 40th percentile of earnings of full-time salaried workers.
  4. $134,004/year – This is the new minimum total compensation threshold for the Highly Compensated Employee (HCE) exemption. It is the 90th percentile of full-time salaried workers nationally, providing no relief to employers in lower wage-earning regions.  This is more than anticipated in the proposed rule, and it is a 34% increase over the current threshold of $100,000/year.

No changes were made to the duties tests for the White Collar Exemptions.

If your organization planned ahead, the above summary provides the numbers you need to move those plans forward. If your organization has not done anything to prepare for these changes, there is much work to be done. Either way, we are here for employers. With the recent addition of Compliance Specialist Mike Staebell, to the Dickinson Labor and Employment team, we are uniquely positioned to help all kinds of organizations through these changes. See Mike’s bio here.

We will digest the rules and materials issued by the DOL over the coming days and update you if more details need to be known.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.


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