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DOL Finalizes Overtime Exemption Threshold Rule

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DOL Finalizes Overtime Exemption Threshold Rule

Friday, May 20, 2016

On May 17, the Department of Labor (DOL) finalized a rule which updates the Fair Labor Standards Act (FLSA) to increase the salary threshold at which certain supervisory and professional workers are exempt from overtime requirements, with the salary level increasing automatically over time. The Department also issued standalone guidance pertaining to a non-enforcement policy specific to certain Medicaid-funded IDD providers. The effective date of the rule is December 1, 2016.

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ANCOR is currently developing a comprehensive analysis of the rule, a legal memorandum on the non-enforcement policy's applicability to providers, and an informational webinar. In the meantime, the key provisions of the rule follow.

  • Salary threshold set to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region (currently the South). This will be $913/week ($47,476/year) for a full-year worker starting December 1, 2016.
  • Set the total annual compensation requirement for Highly Compensated Employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004.
  • Establish a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
  • No changes to the current duties tests for executive, administrative, professional, outside sales, and highly compensated employees. 

The standalone policy announcement of the non-enforcement period is targeted to providers of Medicaid-funded services for individuals with IDD in residential homes and facilities with 15 or fewer beds. The policy is clear that it applies only to residential settings of that size. Our initial understanding is that this would not apply to employees of a provider that work in other facilities for the same provider, but only to those in the settings defined in the policy. Although the period of non-enforcement runs through March 17, 2019 (the same date that states must complete transitioning under the CMS HCBS rule), it is important to note that a policy of non-enforcement by DOL does not protect providers from private enforcement of the FLSA. Additionally, many states have employment law that mirrors, or in some cases is more stringent, than the FLSA. ANCOR is working to get additional clarification on general legal applicability of the non-enforcement policy, but strongly advises providers to seek legal counsel to assess liability exposure under the law. 

ANCOR has, through its Save Our Services (SOS) Campaign, worked diligently to influence the administration, Congress, industry partners, and the general public regarding our concerns with the rule. Although there is significant work ahead of us as the rule moves to implementation, the fact of the non-enforcement policy shows that our unique position has been heard at the highest levels. We look forward to continuing to work with DOL, HHS, Congress, and other stakeholders in the coming months. The statement released by ANCOR on the rule's release is available here.

Vice President Joe Biden joined Secretary of Labor Thomas Perez at an event in Ohio announcing the rule as a victory for middle-class families. Audio of that appearance is available here. The DOL website which houses links to additional fact sheets is here.