FLSA Final Rule Q&A

What is the FLSA? The Fair Labor Standards Act (FLSA) is a federal labor law aiming to protect United States workers. The act guarantees employees at least the federal minimum wage for every hour worked, as well as one and a half times their regular rate of pay for every hour worked over 40 hours in a work week.

The FLSA allows employers to claim exemptions from the above requirements for certain employees.

Who is exempt? Executive, administrative, and professional employees are exempt from the federal law as long as they are paid at the standard salary level. These ‘white collar’ exemptions are based on the type of work completed by the employee. With this exemption, workers are paid the same weekly salary regardless of the quantity or quality of work and are not entitled to overtime pay.

What is changing? The standard salary level is set to increase December 1, 2016. The U.S. Department of Labor determined the current standard salary level of $23,660 was outdated. The new standard salary level will be $47,746.

If an employer pays a worker less than $47,746 annually, the employee will be entitled to overtime pay for hours worked beyond 40 in a work week.

According to the Final Rule, the standard salary level will adjust every three years to the 40th percentile.

Previously, bonus, commission, and/or incentive payments were not included in the standard salary level. With the new ruling, these payments may account for 10% of the annual salary. This allows employers to pay workers $822 per week rather than $913 per week, as long as the worker receives $4,732 in bonuses, commissions, and/or incentive payments throughout the year.

For more information regarding the Final Rule, visit the following links:

Small Business Guide
Wage and Hour Division Fact Sheet
Department of Labor Frequently Asked Questions