Implementation of the 2016 overtime rule did not take effect due to a Nov. 26, 2016 injunction by a federal district court.
With the change of administration, the U.S. Department of Labor (DOL) is revisiting the rule in 2017 and has issued a request from information from the public. Written comments are due on or before September 25, 2017.
Final 2016 Rule
The DOL released its Final Rule on overtime pay regulations for employees covered by the Fair Labor Standards Act (FLSA).
FLSA coverage applies to employees who work for certain "enterprises" (businesses or organizations) or who regularly engage in interstate commerce.
Effective December 1, 2016, the rule would have changed the salary level but not the duties test for exempt employees as follows:
- Setting the minimum salary level for exempt full-time workers at $913 per week or $47,476 per year (40th percentile of full-time salaried workers).
- Setting the total annual compensation requirement for highly compensated employees (HCE) at $134,004 (90th percentile of full time salaried workers).
- Automatically updating salary and compensation levels every three years to maintain wages at these percentiles.
Nationally, 8 percent of employees would have been automatically eligible for overtime pay based on their salary amounts (4 million workers nationwide, 73,000 in Colorado).
- 90 percent of this salary level must be paid weekly.
- 10 percent may be paid through nondiscretionary bonuses, incentive pay, or commissions on at least a quarterly basis.
- One pay period will be given after the quarter to make up any shortfall.
Guidance for Nonprofits
Nonprofits should plan for any changes to employees’ wages in their 2017 budgets.
Background and Exemption Information
For an employee to be exempt from overtime pay, DOL regulations have required three tests to be met:
1. The employee must be paid a predetermined and fixed salary that is not reduced based on changes in the quality or quantity of work performed.
2. The amount of salary paid must meet a minimum specified amount (Prior to Dec. 1, 2016, this is $455 per week/$23,660 for a full year).
3. The employee's job duties must primarily involve executive, administrative, or professional duties as defined by the regulations
Additional resources on final rule and coverage
- National Survey of Nonprofits on Overtime Rule Change
- Independent Sector's Updates on Overtime Rule
- Classifying employees correctly