While the implementation of the U.S. Department of Labor's intended revisions to the FLSA's overtime regulations remains on hold due to pending litigation, the New York State Department of Labor has taken matters into its own hands and, earlier today, published a final rule substantially increasing the salary threshold necessary for exemption under both the administrative and executive exemptions. These changes go into effect almost immediately, on December 31, 2016.
The Revised Regulations
As expected, New York State's new regulations create differing salary threshold requirements based on an employer's size and geographic location within New York State. For example, larger employers in New York City will be subject to a higher exemption threshold, whereas smaller New York City employers will be subject to a lower threshold. (Employer size is not relevant to employers outside of New York City.) Further, employers in New York City will be subject to a higher exemption threshold than employers outside of New York City. The new thresholds will be phased in incrementally over a number of years, with employers in New York City expected to phase in a higher exemption threshold most quickly.
Below is a summary of the new exemption threshold schedule:
Small Employers in New York City (10 or fewer employees)
- $787.50 / week ($40,950 / year) – Effective 12/31/16
- $900.00 / week ($46,800 / year) – Effective 12/31/17
- $1,012.50 / week ($52,650 / year) – Effective 12/31/18
- $1,125.00 / week ($58,500 / year) – Effective 12/31/19
Large Employers in New York City (11 or more employees)
- $825.00 / week ($42,900 / year) – Effective 12/31/16
- $975.00 / week ($50,700 / year) – Effective 12/31/17
- $1,125.00 / week ($58,500 / year) – Effective 12/31/18
Employers in Westchester, Nassau, and Suffolk Counties
- $750.00 / week ($39,000 / year) – Effective 12/31/16
- $825.00 / week ($42,900 / year) – Effective 12/31/17
- $900.00 / week ($46,800 / year) – Effective 12/31/18
- $975.00 / week ($50,700 / year) – Effective 12/31/19
- $1,050.00 / week ($54,600 / year) – Effective 12/31/20
- $1,125.00 / week ($58,500 / year) – Effective 12/31/21
Employers Outside of New York City, Westchester, Nassau and Suffolk Counties
- $727.50 / week ($37,830 / year) – Effective 12/31/16
- $780.00 / week ($40,560 / year) – Effective 12/31/17
- $832.00 / week ($43,264 / year) – Effective 12/31/18
- $885.00 / week ($46,020 / year) – Effective 12/31/19
- $937.50 / week ($48,750 / year) – Effective 12/31/20
What Does This Mean for Employers?
As noted, the new regulations become effective on December 31, 2016. Therefore, New York employers must quickly assess whether the currently salaries of their exempt administrative and executive employees fall at or above the new threshold. If they fall below the threshold, employers must decide whether to raise such employees' salaries in order to meet the threshold or instead to reclassify such employees as non-exempt.
Even after addressing this most pressing issue, employers must continue to regularly assess the exempt status of their "administrative" and "executive" employees, as the salary thresholds will continue to rise on an annual basis and the penalties for non-compliance can be severe. It is also important to note that the current injunction that applies to the revised FLSA regulations has no effect on the revised New York regulations; New York employers must quickly comply, regardless of the outcome of the federal litigation over the FLSA regulations.
We will continue to provide updates as the New York State Department of Labor sets forth instructive guidance on its new regulations.