Marshall & Sterling Insurance June, 2016 | Page 7

Highly Compensated Employees
Under the final rule, highly compensated employees qualify for an overtime exception if they meet the new salary level
of $134,004 per year. However these individuals must receive at least the full standard salary amount each pay period
(i.e., $913 per week, $1,826 bi-weekly or $3,956.33 per month) on a salary or fee basis (not counting non-discretionary
bonuses and incentive payments).
The remainder of a highly compensated employee’s wages may be calculated by including the full amount of nondiscretionary bonuses and incentive payments (including commissions).

Impact on Employers
Given the significant increase in the salary level requirement, employers will need to increase employee salaries, or reclassify certain employees as either exempt or non-exempt, solely based on their salary level. The DOL estimates that
this final rule extends overtime protections to approximately 4.2 million workers who are currently exempt under the
white collar rules and clarifies overtime compensation eligibility for another 5.7 million white collar workers and 3.2
million salaried blue collar workers whose entitlement to overtime pay will no longer rely on the application of the
duties test.
In addition, because of the short implementation deadline, employers should not delay becoming familiar with the new
requirements and implementing any necessary changes into their timekeeping and payroll systems. Employers should
also determine whether additional training on modifications is necessary for their managers and supervisors.
Finally, employers should also consider communicating with employees to inform them of how their wages, hours of
work and timekeeping practices will be affected.

Enforcement and Compliance
Employers that fail to comply with the final rule may be subject to a variety of overtime wage payment enforcement
mechanisms, including the ones listed below.
Private employee lawsuits: These lawsuits can be initiated by employees either individually or through collective
action to recover back pay, interest, attorneys’ fees and court costs.
Administrative injunctions: These injunctions may include a prohibition on the shipment of goods in interstate
commerce if the goods were produced in violation of the FLSA (including overtime wage payment provisions).
Civil fines for willful and repeated violations (up to $1,100 per violation).
Criminal charges for willful violations (up to $10,000 in fines, imprisonment for up to six months or both).

More Information
Please contact Marshall & Sterling Insurance for more information on the FLSA and other wage and hour laws.

This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.
Readers should contact legal counsel for legal advice.
© 2016 Zywave, Inc. All rights reserved. JPA 05/16

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