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DOL raises threshold for OT exemptions

More employees will become eligible to earn overtime under new regulations released by the U.S. Department of Labor (DOL) this morning (May 18) governing overtime exemptions under the Fair Labor Standards Act. The new rule goes into effect on Dec. 1, 2016.

DOL also announced a time-limited non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. More information on this is below.

These new regulations include employees of nonprofit organizations. Key provisions of the final rule are:

  • The salary threshold for classifying employees as exempt has doubled, changing from $23,660/year ($455/week) to $47,476/year ($913/week). The new level represents the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region (currently the South).
  • A mechanism will be created to increase the salary threshold every three years to maintain a level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.
  • The total annual compensation requirement for highly compensated employees is the equivalent of the 90th percentile of full-time salaries workers nationally under the new regulations. It will rise to $134,004/year under the new rule.

The Department of Labor has issued a fact sheet on the final overtime rule and the nonprofit sector, which you can access here. It has also issued Guidance for Nonprofit Organization on Paying Overtime under the Fair Labor Standards Act.

Additionally, the Department of Labor's time-limited non-enforcement policy for Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds means that the DOL will not enforce the updated salary threshold for this subset of employees from December 1, 2016 to March 17, 2019. Please note: The policy does not apply to providers of services should the facility have 16 or more beds. You can read more about this policy here.

The Providers' Council is working to provide training opportunities for human service providers to learn more about the new regulations and a forum to discuss this issue with your colleagues.