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Overtime Rule Doubles Salary Threshold Increases Burden on Contractors

May 19, 2016

AGC Plays Vital Role in Attempting to Limit Burden, Will Continue to Pursue Corrective Action

On May 18, the U.S. Department of Labor released its final rule implementing changes to the Fair Labor Standards Act (FLSA) overtime regulations.  The most significant change is a doubling of the standard salary threshold for exempt employees – from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).  The rule takes effect on Dec. 1, 2016. In 2015, AGC sent both individual comments and signed onto coalition comments on the proposed rule. These comments raised strong concerns that the proposed salary threshold of $970 per week ($50,440 per year) would be too large an increase for employers to absorb all at once. While not all of AGC’s and the coalition’s recommendations were accepted, the final rule does establish a lower salary threshold than originally proposed.  The final rule’s concession for bonuses and commissions and its abstinence from changing the duties test are also consistent with AGC’s recommendations.

Other key aspects of the rule include:

  • Employers will be able to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level, provided payments are made on at least a quarterly basis. 
  • The salary threshold for highly-compensated individuals will increase from $100,000 to $134,004. Bonus and incentive payments still may not count toward this threshold. 
  • The salary thresholds (for both the standard and highly-compensated employee exemptions) will automatically increase every three years.
  • No changes were made to the highly-debated duties test.

AGC will continue to monitor any developments in Congress or the courts that stop or limit the rule, and will notify members accordingly.   Meanwhile, members should begin carefully reviewing compensation practices to determine whether any employees currently classified as exempt are paid a salary of at least $455 per week but less than $913 per week, as such employees will no longer qualify for exemption. Under the new rule, employers must either (1) track such employees’ work hours and pay them overtime in accordance with FLSA mandates, or (2) increase their pay to meet the new salary threshold.  AGC recommends seeking the assistance of an employment lawyer licensed to practice in your state with any concerns or complications.

For more information, contact Tamika Carter at or Denise Gold at 

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