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Final regulations may draw down exempt salary level to $47,000

May 10, 2016

Article courtesy of SBAM Approved Partner ASE
A recent report suggests that final regulations from the Department of Labor will lower the level for exemption from overtime pay to approximately $47,000/year from the $50,440 originally proposed nearly a year ago. The exact level is not known other than that it will be in the $47,000-plus range.

Further, the level for defining “highly compensated” will go from $100,000/year to $122,148/year by indexing the salary level to the 90th percentile of earnings for full-time salaried workers. Discretionary pay will be counted towards determining an employee’s highly compensated status. 

But discretionary pay will not be used in determining exempt status. Many responses to the DOL’s original proposal requested that discretionary income be counted in determining exempt status also.

DOL Solicitor of Labor M. Patricia Smith stated at the midwinter meeting of the American Bar Association that the amended rules would be finalized in July 2016 and the effective date would be 60 days thereafter. Pundits, however, have speculated that the rule could come out as early as May 16th, 60 days after the submission to the OMB.

The left-leaning Economic Policy Institute, which helped the DOL come up with the economic basis for the threshold, expressed disappointment at the drop but acceptance of the result. “One million fewer people helped, but it’s still 12.5 million people who will get the benefit of the rule,” said Vice President Ross Eisenbrey. 

But a coalition of employers called the Partnership to Protect Workplace Opportunity said the $47,000 level is not low enough. “This is still a 99% increase,” said spokesperson Lisa Horn. “A token reduction will not alleviate the harm this rule will do to nonprofits, colleges, and small businesses and their employees.”

ASE will report on the details of the final regulations once they are promulgated. We will schedule Hot Button Briefings as well. Look for more information once the dust has settled.  Questions?

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