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Federal Register/Vol. 81, No. 99/Monday, May 23, 2016/Rules Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Rules and Regulations 32391 individuals with intellectual or DEPARTMENT OF LABOR The Department also adds a provision to developmental disabilities in residential the regulations that automatically homes and facilities with 15 or fewer Wage and Hour Division updates the standard salary level and beds. This non-enforcement period will HCE compensation requirements every last from December 1, 2016 (the 29 CFR Part 541 three years by maintaining the earnings effective date of the Overtime Final RIN 1235–AA11 percentiles set in this Final Rule to Rule) until March 17, 2019. During this prevent these thresholds from becoming period of non-enforcement, the Defining and Delimiting the outdated. Finally, the Department has Department will not enforce the Exemptions for Executive, not made any changes in this Final Rule updated salary threshold of $913 per Administrative, Professional, Outside to the duties tests for the EAP week for the subset of employers Sales and Computer Employees exemption. covered by this non-enforcement policy. AGENCY: Wage and Hour Division, DATES: This Final Rule is effective on However, the Department will continue Department of Labor. December 1, 2016. to enforce all other provisions of the ACTION: Final rule. FOR FURTHER INFORMATION CONTACT: Overtime Final Rule as to this subset of Director, Division of Regulations, employers, including in instances SUMMARY: The Fair Labor Standards Act Legislation and Interpretation, U.S. involving employees who meet the (FLSA or Act) guarantees a minimum Department of Labor, Wage and Hour salary basis and duties tests but who wage for all hours worked during the Division, Room S–3502, 200 earn less than the previous salary workweek and overtime premium pay of Constitution Avenue NW., Washington, not less than one and one-half times the threshold of $455 per week. The non- DC 20210; telephone: (202) 693–0406 employee’s regular rate of pay for hours enforcement policy does not apply to (this is not a toll-free number). Copies worked over 40 in a workweek. While of this Final Rule may be obtained in providers of Medicaid- funded services these protections extend to most for individuals with intellectual or alternative formats (Large Print, Braille, workers, the FLSA does provide a Audio Tape or Disc), upon request, by developmental disabilities in residential number of exemptions. In this Final care facilities with 16 or more beds. calling (202) 693–0675 (this is not a toll- Rule, the Department of Labor free number). TTY/TDD callers may dial Regulatory Requirements (Department) revises final regulations toll-free 1–877–889–5627 to obtain under the FLSA implementing the information or request materials in This document is non-binding exemption from minimum wage and alternative formats. guidance articulating considerations overtime pay for executive, Questions of interpretation and/or relevant to the Department’s exercise of administrative, professional, outside enforcement of the agency’s regulations its enforcement authority under the sales, and computer employees. These may be directed to the nearest Wage and FLSA. It is therefore exempt from the exemptions are frequently referred to as Hour Division (WHD) district office. notice-and-comment rulemaking the ‘‘EAP’’ or ‘‘white collar’’ Locate the nearest office by calling the requirements under the Administrative exemptions. To be considered exempt WHD’s toll-free help line at (866) 4US– Procedure Act pursuant to 5 U.S.C. under part 541, employees must meet WAGE ((866) 487–9243) between 8 a.m. 553(b). certain minimum requirements related and 5 p.m. in your local time zone, or to their primary job duties and, in most Because no notice of proposed log onto WHD’s Web site at http:// instances, must be paid on a salary basis www.dol.gov/whd/america2.htm for a rulemaking is required, the Regulatory at not less than the minimum amounts Flexibility Act does not require an nationwide listing of WHD district and specified in the regulations. area offices. initial or final regulatory flexibility In this Final Rule the Department analysis. 5 U.S.C. 603(a), 604(a). The updates the standard salary level and SUPPLEMENTARY INFORMATION: Department has determined that this total annual compensation requirements Table of Contents guidance does not impose any new or to more effectively distinguish between I. Executive Summary revise any existing recordkeeping, overtime-eligible white collar II. Background reporting, or disclosure requirements on employees and those who may be A. What the FLSA Provides covered entities or members of the exempt, thereby making the exemption B. Legislative History public that would be collections of easier for employers and employees to C. Regulatory History information requiring OMB approval understand and ensuring that the D. Overview of Existing Regulatory under the Paperwork Reduction Act, 44 FLSA’s intended overtime protections Requirements U.S.C. 3501 et seq. are fully implemented. The Department E. Presidential Memorandum sets the standard salary level for exempt F. The Department’s Proposal Authority: 29 U.S.C. 216(c); Secretary’s EAP employees at the 40th percentile of G. Effective Date Order No. 01–2014. III. Need for Rulemaking weekly earnings of full-time salaried IV. Final Regulatory Revisions Mary Ziegler, workers in the lowest-wage Census A. Standard Salary Level Assistant Administrator for Policy, Wage and Region. The Department also permits B. Special Salary Tests Hour Division. employers to satisfy up to 10 percent of C. Inclusion of Nondiscretionary Bonuses, Incentive Payments, and Commissions in [FR Doc. 2016–11753 Filed 5–18–16; 8:45 am] the standard salary requirement with nondiscretionary bonuses, incentive the Salary Level Requirement BILLING CODE 4510–27–P payments, and commissions, provided D. Highly Compensated Employees these forms of compensation are paid at E. Automatic Updates least quarterly. The Department sets the F. Duties Requirements for Exemption V. Paperwork Reduction Act total annual compensation requirement VI. Analysis Conducted in Accordance With for an exempt Highly Compensated Executive Order 12866, Regulatory Employee (HCE) equal to the annualized Planning and Review, and Executive weekly earnings of the 90th percentile Order 13563, Improving Regulation and of full-time salaried workers nationally. Regulatory Review VerDate Sep<11>2014 23:22 May 20, 2016 Jkt 238001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\23MYR2.SGM 23MYR2 mstockstill on DSK3G9T082PROD with RULES2 32392 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Rules and Regulations VII. Final Regulatory Flexibility Analysis regulations implementing the test salary level. This had the effect of VIII. Unfunded Mandates Reform Act exemption have generally required each making it easier for employers to both Analysis of three tests to be met for the pay employees a lower salary and not VIIIX. Executive Order 13132, Federalism exemption to apply: (1) The employee pay them overtime for time worked IX. Executive Order 13175, Indian Tribal beyond 40 hours. The 2004 Final Rule Governments must be paid a predetermined and fixed XI. Effects on Families salary that is not subject to reduction also created an exemption for highly XII. Executive Order 13045, Protection of because of variations in the quality or compensated employees (HCE), which Children quantity of work performed (the ‘‘salary imposes a very minimal duties test but XIII. Environmental Impact Assessment basis test’’); (2) the amount of salary requires that an employee must earn at XIV. Executive Order 13211, Energy Supply paid must meet a minimum specified least $100,000 in total annual XV. Executive Order 12630, Constitutionally amount (the ‘‘salary level test’’); and (3) compensation. Protected Property Rights the employee’s job duties must On March 13, 2014, President Obama XVI. Executive Order 12988, Civil Justice primarily involve executive, signed a Presidential Memorandum Reform AnalysisFinal Amendments to directing the Department to update the Regulatory Text administrative, or professional duties as defined by the regulations (the ‘‘duties regulations defining which white collar I. Executive Summary test’’). While payment of a salary does workers are protected by the FLSA’s minimum wage and overtime standards. The Fair Labor Standards Act (FLSA not make an employee ineligible for 79 FR 18737 (Apr. 3, 2014). The or Act) guarantees a minimum wage for overtime compensation, the Department memorandum instructed the all hours worked and limits to 40 hours has nonetheless long recognized the Department to look for ways to per week the number of hours an salary level test is the best single test of exempt status for white collar modernize and simplify the regulations employee can work without additional while ensuring that the FLSA’s intended compensation. Section 13(a)(1) of the employees. The salary level test is an objective measure that helps distinguish overtime protections are fully FLSA, which was included in the implemented. The Department original Act in 1938, exempts from these white collar employees who are entitled to overtime from those who may be published a proposal to update the part minimum wage and overtime pay 541 regulations on July 6, 2015. protections ‘‘any employee employed in bona fide executive, administrative, or professional (EAP) employees. If left at One of the Department’s primary a bona fide executive, administrative, or goals in this rulemaking is updating the professional capacity.’’ The exemption the same amount over time, however, the effectiveness of the salary level test standard salary requirement, both in is premised on the belief that these light of the passage of time since 2004, kinds of workers typically earn salaries as a means of determining exempt status diminishes as the wages of employees and because the Department has well above the minimum wage and concluded that the effect of the 2004 increase and the real value of the salary enjoy other privileges, including above- Final Rule’s pairing of a standard duties threshold falls.
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