The industry is a leader in creation of non-exportable jobs. Not only did the industry directly employ more than 1.4 million people in 2011, but it indirectly generated an additional 1 million jobs, creating a total job impact of 2.3 million. Across the industry, the total payroll was more than $11 billion.
Under the Fair Labor Standards Act (FLSA), employees are to be paid at a rate of at least one and a half times their regular rate for any hours worked over 40 in a week, unless they have been classified as exempt under certain statutory categories or meet other requirements in the regulations.
On May 18, the Department of Labor's (DOL) Wage and Hour Division released its final rule, implementing changes to the exemptions for executive, administrative, and professional employees (the "white collar exemptions") under the Fair Labor Standard Act's (FLSA) overtime pay requirements. The rule was published in the Federal Register on May 23, 2016.
Key provisions of the final rule are as follows:
- The salary threshold for classifying an employee as exempt from overtime increases from $23,660 ($455 per week) to $47,476 annually ($913 per week).
- Up to 10% of the salary level can be met with bonuses and commissions. For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the standard salary level test, however, such payments must be paid on a quarterly or more frequent basis and the employer is "permitted" receive a "catch-up" payment.
- Automatic salary threshold increases will occur every three years starting January 1, 2020. The amount will be based on the 40th percentile of full-time salaried workers in the lowest-wage region identified by the U.S. Census Bureau (historically, the South).
- DOL did not propose a new "duties test" regarding the responsibilities of exempt managerial employees
- The total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test is set to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004).
- The final rule will become effective on December 1, 2016.
The significant increase to the salary level threshold, as well as automatic increases in the future, will hurt small businesses, schools, municipalities, nonprofits and other employers, as well as workers and the economy as a whole. IAAPA will continue to advocate with the Partnership to Protect Workplace Opportunity (PPWO) (a coalition of more than 90 organizations representing the broad employer community) for a regulation that is considerate of the economic realities facing employers and employees across the country.