New Federal Overtime Rule Finalized

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Quick Facts about the new U.S. Department of Labor’s (DOL) Overtime Rule:

  • The new minimum salary threshold has been set at $47,476 per year;
  • The final rule will allow up to 10 percent of the salary threshold to be met by non-discretionary bonuses, incentive pay or commissions, provided these payments are made at least on a quarterly basis;
  • The threshold will automatically update every three years, and will be tied to the 40th percentile of full-time salaried workers in the lowest-wage Census region;
  • DOL will post new salary levels 150 days in advance of their effective date, beginning August 1, 2019;
  • DOL did not make any changes to the primary duties test; and
  • Employers will need to be in compliance with the new regulations by December 1, 2016.

On May 18, the U.S. Department of Labor (DOL) released its final rule altering the white collar exemptions to the overtime pay requirements under the Fair Labor Standards Act (FLSA). As you may know, employees are entitled to overtime pay at the rate of one-and-a-half times their normal hourly rate for all hours worked over forty (40) in a given workweek. However, the FLSA includes certain exemptions to such requirements. One of those, known as the white-collar exemption, was changed by the department.

In order to qualify for this exemption, an employee must 1) be paid on a salary basis, 2) be paid at least the minimum salary threshold set by the department, and 3) have primary responsibilities consistent with executive, administrative, or professional positions as defined by DOL (known as the primary duties test).

Under the new final rule, the department increased the minimum salary threshold from $23,660 per year to $47,476, a roughly 100% increase. DOL also announced it will automatically increase this threshold every three years to ensure it stays at the 40th percentile of earnings for full-time salaried workers in the lowest-wage Census region. DOL did not make any changes to the duties test, so those existing measures still apply. Employers will need to comply fully with the new rule by December 1, 2016. Automatic increases in the threshold will begin in 2020, at which point it is expected to rise to $51,168. Employers will have 150 days to comply with the new threshold following each increase.

While there were several press reports that the rule would include exemptions for institutions of higher education, they proved inaccurate. Francis Collins of the National Institute of Health (NIH) did announce, however, that NIH will increase individual grant awards under the National Research Service Awards (NRSA) for postdoctoral researchers (known as postdocs) above the new threshold. It’s unclear from the announcement, however, whether this will result in a reduction in the number of grants awarded each year.

DOL has issued several fact sheets (including materials specific to higher education), a Q&A document, and other materials []. In addition, EDUCAUSE joined with several other higher education associations to co-sponsor a May 25 webinar conducted by the higher education human resources association, CUPA-HR, on the practical realities of the new rule for colleges and universities. The session recording is available here [].

Jen Ortega serves as a consultant to EDUCAUSE on federal policy and government relations. She has worked with EDUCAUSE since 2013 and assists with monitoring legislative and regulatory proposals across a range of policy areas, including cybersecurity, data privacy, e-learning, and accessibility.