DOL Issues Long-Awaited Final Rule on Overtime Regulations
May 17, 2016
On May 18, 2016, the Department of Labor (DOL) will finalize the rule implementing revisions to the overtime regulations of the Fair Labor Standards Act. The release of the rule ends months of intense speculation as to its major features-in particular, prognostication about the new “white-collar” exemption salary threshold and whether the final rule would alter the primary duty test.
According to a May 17, 2016 White House press release, the new rule will “extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law, and it is expected to boost wages for workers by $12 billion over the next 10 years.”
As discussed below, notable provisions in the final rule include:
- The salary threshold is increased from $23,660 per year to $47,476 (or $913 per week);
- The salary threshold will automatically update every three years;
- The highly compensated employee exemption salary threshold is increased to $134,004;
- The final rule does not change the current primary duty test; and
- The final rule has an effective date of December 1, 2016.
White Collar Exemption Salary Threshold Increased to $47,476
The final rule doubles the current salary threshold for the so-called “white collar exemptions” (i.e., executive, administrative, professional, and computer employees) from $23,660 a year to $47,476. The threshold is pegged to the 40th percentile of full-time salaried workers in the lowest-wage Census Region, currently, the South. Even though the final figure is several thousand dollars below the $50,440 proposed by DOL last July, many employers believe the increase is far too drastic. In addition, for the first time, employers will be able to count certain bonuses and incentive payments (including commissions) toward as much as 10 percent of the salary threshold, so long as these payments are made at least quarterly. Examples of such payments include bonuses for meeting production goals, retention bonuses, and commission payments based on a fixed formula.
Salary Threshold Will Automatically Update Every Three Years
The new rule provides that the salary threshold will update automatically every three years, with the first update taking place on January 1, 2020. The administration has projected that the threshold will increase to $51,000 in 2020. The DOL will publish all updated rates in the Federal Register at least 150 days before their effective date, and also post them on the Wage and Hour Division’s website. A number of commentators have argued that this indexing feature may be vulnerable to legal challenges, so stay tuned for further developments.
Highly Compensated Employee Exemption Threshold Increased to $134,004
The salary requirement for the highly compensated employee exemption has increased by 34%, from $100,000 per year to $134,004-a figure tied to the 90th percentile of full-time salaried workers nationally. As with the white-collar salary threshold, the highly compensated employee threshold will increase every three years.
No Change to “Primary Duty” Test
Significantly, the final rule does not change the requirements of the current “primary duty” test, which allows an employee to be exempt even if she spends less than 50% of her time performing exempt duties, so long as her primary duty or duties are exempt duties. While the DOL’s proposed regulations did not offer any specific changes to the primary duty test, the Department did invite comments on whether any adjustments were necessary, fueling speculation about whether the rule would impose a strict new standard akin to the one currently in place in California.
The New Standards Become Effective on December 1, 2016
As something of a silver lining for employers, the final rule has an effective date of December 1, 2016, giving employers nearly 200 days to comply after the rule’s final publication in the Federal Register. This far exceeds the 60 days that many commentators were anticipating and gives employers significantly more time to come into compliance with the new rule. The DOL has released three technical guidance documents designed to help private employers, non-profit employers, and institutions of higher education come into compliance with the new rule.
In addition to the above, these new overtime rules will have an effect on government contracts. Government contractors should review their contracts to determine the impact these changes may have on their contract performance, direct and indirect rates, and pricing.
FortneyScott’s subject matter experts will present a complimentary webinar to discuss the details of the regulations and modes of response on May 25, 2016. To register, CLICK HERE.
Having been fully funded for FY2026 and with new leadership in place, employers can expect much more from the Department of Labor in the second year of Trump 2.0. Join FortneyScott attorneys on Tuesday, March 3, 2026 at noon EDT to learn DOL’s priorities for 2026 and how to ensure compliance. Key Topics to be Covered Include: Overview of DOL Trump 2.0 officials Budget for FY2026 Next Steps from Wage & Hour Status of regulations PAID Program Return of Opinion Letters Child Labor enforcement FY2025 recovery Project Firewall Joint project with DOJ, EEOC and USCIS over H-1Bs Future of OFCCP – What to expect from the agency now that it has been funded Key Takeaways to ensure compliance This webinar is the second in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance. To register for FortneyScott’s Workplace Legal Compliance training series, please click here .
Fortney Scott Attorney David Fortney Co-Chairs and Speaks at the Practicing Law Institute's Annual Wage & Hour Litigation and Compliance for 2026
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Fortney Scott Attorney David Fortney Co-Chairs and Speaks at the Practicing Law Institute's Annual Wage & Hour Litigation and Compliance for 2026
DEI continues to be a high priority issue for the Trump Administration. Recent actions by multiple federal agencies, signal increased scrutiny of employer DEI programs. In the past week alone, the Administration has taken several significant actions: The EEOC filed a subpoena enforcement action against Nike based on a May 2024 Commissioner’s charge filed by EEOC Chair Andrea Lucas. The subpoena seeks company-wide information dating back to 2018, reflecting a more expansive approach to DEI-related investigation and increased willingness to pursue enforcement in federal court. The Chair of the Federal Trade Commission issued letters to 42 leading law firms warning that participation in the Mansfield Certification program may raise antitrust concerns. EEOC Chair Lucas was copied on the correspondence, highlighting coordinated federal agency attention to diversity-based initiatives. President Trump made additional demands on Harvard concerning its DEI-practices, substantially increasing the monetary demands from $200 million to $1 billion, while signaling the possibility of additional legal action, including potential criminal exposure. Federal funding was suspended for one of the largest infrastructure projects in the U.S., the $16 Billion Hudson Tunnel project, based on minority set aside contracting requirements, prompting litigation. This action, which impacts train services between New York City and New Jersey, underscores the intersection of DEI initiatives and federal funding risks. What should employers do now? In the current enforcement environment, employers should: Continue to assess DEI programs for legal risk. With a full EEOC quorum now in place, increased scrutiny of corporate DEI programs is likely. Although most employers have reviewed their DEI programs and made necessary changes to address legal compliance, the renewed focus on DEI requires ongoing assessment and update of DEI programs. Ensuring that these best practices remain in place and are followed is crucial. Prepare for the possibility of broader EEOC investigations. Recent enforcement activity reflects an increased willingness by the EEOC to pursue company-wide inquiries, often supported by expedited subpoena enforcement in matters that originate as individual discrimination charges filed by white employees and applicants. Evaluate participation in diversity rankings and certifications. Employers should evaluate whether participation in voluntary diversity assessments, ranking programs or other public reporting of diversity results unnecessarily raises the organization's profile and invites heightened scrutiny from the EEOC and other enforcement agencies. Please contact your FortneyScott attorney or email us at info@fortneyscott.com for additional information on how to be prepared and other best practices recommendations.
As we move further into 2026, employers should review notable changes to DC employment laws that may impact workplace policies and compliance obligations. Minimum and Living Wage Rates : From January 1, 2026, through June 30, 2026, any DC contract or government assistance recipient receiving $100,000 or more, as well as their subcontractors receiving at least $15,000 for contracts or $50,000 for government assistance, must pay at least the living wage rate of $17.95 per hour. Starting July 1, 2026, both the minimum wage rate and the living wage rate will increase to $18.40 per hour. For tipped employees, the base minimum wage increases to $10.30 per hour on July 1, 2026. Non-Compete Restrictions : Starting January 1, 2026, employers are banned from entering non-compete agreements with employees earning less than $162,164, and with medical specialists earning less than $270,274 Pay Stub Transparency : Starting January 1, 2026, employers must itemize all sources of compensation on employees’ pay stubs, including wages, bonuses, commissions, tips, service charges, etc.
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