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September 23, 2016

On May 18, 2016, the United States Department of Labor (DOL) published the final rule on changes to the Fair Labor Standards Act (FLSA) overtime rules. The rule changes go into effect on December 1, 2016 and practitioners, firms and clients should plan to ensure compliance with employees as the effective date approaches.

Key Provisions of the Final Rule

  1. Increase in Salary Threshold - The increase will double the current salary threshold of $23,660 to $47,476 for overtime pay eligibility. The salary threshold for highly compensated employees increases to $134,004.\
  2. Automatic updates to salary requirements - The new rules provide for automatic increases of the two salary thresholds cited above every 3 years beginning January 1, 2020. DOL will publish updated rates in the Federal Register 150 days prior to their effective date and also post them on the Wage and Hour Division’s website.
  3. No changes to duties test - The newly published rules did not make any changes to the duties test for the administrative, executive, professional or highly compensated employee exemptions.

Background

We understand that you may have received or read other material regarding the enactment of these new employer requirements, however; due to the expansive nature of the salary threshold and the potential impact on firms and employers, we wanted to provide you with this regulatory information to ensure compliance with your own employees and to better serve your clients. The DOL has posted useful background information on the Wage and Hour Divisions website.

Potential Congressional Intervention

HR 5813, Overtime Reform and Enhancement Act (OREA) has been introduced in the United States House of Representatives. If passed by both Chambers and signed into law by the President, OREA would eliminate the automatic update provision and would gradually increase the salary threshold over a three-year period ending in 2019, rather than all at once on December 1, 2016 as currently required by the DOL administrative rules. The AICPA and ICPAS will continue to be actively engaged in advocating legislative remedies to make the rule less disruptive. We will also keep you informed of the progress of this legislation.