	Frequently Asked Questions

This report addresses frequently asked questions related to the overtime provisions in the Fair Labor Standards Act (FLSA) and the overtime pay exemptions for executive, administrative, and professional employees (the "EAP" or "white collar" exemptions). The FLSA, enacted in 1938, is the main federal legislation that establishes general labor standards for most, but not all, private and public sector employees. In general, unless an employee is specifically exempted in the FLSA, he or she is considered to be a covered "nonexempt" employee and must receive pay at the rate of one-and-a-half times ("time and a half") the regular rate for any hours worked in excess of 40 hours in a workweek. Rather than define the terms executive, administrative, or professional employee, the FLSA authorizes the Secretary of Labor to define and delimit these terms "from time to time" by regulations . The "salary basis" test: employee must be paid a predetermined and fixed salary. The "duties" test: employee must perform executive, administrative, or professional duties. Rather, the Secretary of Labor, through issuance of regulations, specifies the duties that EAP employees must perform to be exempt from overtime pay requirements of the FLSA. The 2016 Final Rule on the EAP Exemptions

			What are the main changes to the EAP exemption included in the 2016 final rule? On July 6, 2015, a Notice of Proposed Rulemaking (NPRM) was published in the Federal Register to define and delimit EAP exemptions. The final rule was published in the Federal Register on May 23, 2016. The primary changes to the EAP exemption in the 2016 final rule include
an increase in the salary level test from the current $455 per week ($23,660 annually) to $913 per week ($47,476 annually); an increase in the annual salary threshold for the HCE exemption from $100,000 to $134,004; indexation of the salary level to the 40 th percentile of weekly earnings so that it would automatically be updated every three years; and an allowance that up to 10% of the standard salary level may be comprised of nondiscretionary bonuses, incentive payments, and commissions. The 2016 final rule implements a mechanism to automatically update the EAP salary level thresholds. Effective December 1, 2016, the standard salary level for the EAP exemption is $913 per week. Does the 2016 final rule affect independent contractors? With caveats, DOL estimates that approximately 13.1 million workers would be affected by the proposed rule. Specifically, DOL estimates the following:
In the first year under the provisions of the 2016 final rule, about 4.2 million EAP employees would become newly entitled to overtime pay due to the increase in the salary threshold.
The Fair Labor Standards Act (FLSA), enacted in 1938, is the main federal legislation that establishes general wage and hour standards for most, but not all, private and public sector employees. Among other protections, the FLSA establishes that covered nonexempt employees must be compensated at one-and-a-half times their regular rate of pay for each hour worked over 40 hours in a workweek.
The FLSA also establishes certain exemptions from its general labor market standards. One of the major exemptions to the overtime provisions in the FLSA is for bona fide "executive, administrative, and professional" employees (the "EAP" or "white collar" exemptions). The FLSA grants authority to the Secretary of Labor to define and delimit the EAP exemption "from time to time." To qualify for this exemption from the FLSA's overtime pay requirement, an employee must be salaried (the "salary basis" test), must perform specified executive, administrative, or professional duties (the "duties" test), and must earn above a salary level threshold (the "salary level" test).
In July 2015, the Secretary of Labor published a Notice of Proposed Rulemaking (NPRM) to make changes to the EAP exemption. After receiving approximately 294,000 comments on the NPRM, the Secretary of Labor published the Final Rule on the EAP exemption on May 23, 2016 (2016 final rule). The 2016 final rule is effective December 1, 2016. The major changes in the 2016 final rule include increasing the salary level threshold from the previous level of $455 per week to $913 per week and providing an automatic update to the salary level every three years. The 2016 final rule does not change the duties and responsibilities that employees must perform to be exempt. Thus, the 2016 final rule will affect EAP employees at salary levels between $455 and $913 per week in 2016. The Department of Labor (DOL) estimates that about 13.1 million workers will be affected in the first year, including about 4.2 million EAP employees who will become newly entitled to overtime pay.
This report answers frequently asked questions about the overtime provisions of the FLSA, the EAP exemptions, and the 2016 final rule that defines and delimits the EAP exemption.