Labor Department Issues Final Overtime Rule

The Department of Labor is today releasing its final rule doubling the salary level used to determine whether employees are classified as exempt from overtime under the Fair Labor Standards Act. Starting on Dec. 1, the new salary level for exemptions will grow from $23,660 to $47,476, or $913 per week.

“If this rule were supposed to help workers, it misses the mark,” said ABA President and CEO Rob Nichols. “It will be harmful to bank employees and the banks who employ them. As it stands, throngs of employees across the country, especially those at small banks and branches where a handful of employees wear many hats, will face reduced opportunity and flexibility in the workplace.”

The final rule sets the salary threshold at the 40th percentile of earnings of full-time salaried workers in the lowest-wage region identified by the U.S. Census Bureau–currently the South. The salary threshold in the final rule is nearly $3,000 lower than when the rule was proposed, a nod to comments from the American Bankers Association and other groups noting that the rule ignored regional disparities in pay.

However, in its comment letter last fall, ABA noted that the percentile-based approach to calculating the threshold is itself flawed, since fewer workers will be exempt and salaries for non-exempt employees will skew higher. The salary threshold will automatically update every three years, instead of annually as proposed.

Meanwhile, the salary level for highly compensated employees–at which employers may conduct only a minimal duties test for exemption–will rise from $100,000 to $134,000. Up to 10 percent of the standard salary level can come from non-discretionary bonuses, incentive payments and commissions, paid at least quarterly.

In response from advocacy by ABA and others, DoL declined to make any changes to the “duties tests” for exemption. ABA will thoroughly review the final rule and provide a staff analysis soon. The association will also hold a briefing on June 16 to help bankers understand how to comply with the final rule and communicate the changes to employees. For more information, contact ABA’s Cris Naser.

Read an article in the May/June ABA Banking Journal on preparing to comply with the final overtime rule.