Last week the White House rolled out the final rule updating the salary floor that employers must satisfy to avoid overtime pay liability to salaried executives, professionals and administrators.  Effective December 1, 2016, the salary test will rise from $23,660 to $47,476 per year — a figure that corresponds to the 40th percentile of wages paid to non-hourly workers in the lowest Census Region in the country.   The Administration’s decision to increase the guaranteed salary rate for white collar employees by 80 percent in one fell swoop for all employers in all industries and in all employment markets nationwide is highly controversial and is likely to be challenged in the courts as a usurpation of Congressional authority.  If the Administration has its way, the salary test will automatically be adjusted on the third anniversary of the last adjustment based on the same wage market criteria.

Generally, H-1B specialty workers satisfy the criteria for classification as professional employees and are exempt from the payment of overtime provided they are salaried at or above the mandatory amount.    Based on actual wage rates reported in the 2016 Labor Condition Application disclosure files for the first two quarters of FY 2016, more than 2500 potential H-1B workers are targeted to earn annual salaries below $47,476.  

To avoid incurring overtime liability for hours worked over 40, their employers either will need to adjust their guaranteed compensation system to satisfy the new salary test or take other measures to ensure that employee work hours do not exceed the 40-hour workweek maximum.  This includes employers of salaried computer programmers and systems analysts whose actual wages fall below the new threshold.  The Administration has rejected the notion that such workers are entitled only to be paid $27.63 per hour under a separate provision of the Fair Labor Standards Act — maintaining that that provision only applies to computer specialists who are paid on an hourly basis. 

Thus, for example, if an H-1B programmer analyst is salaried at a rate of $47,000 annually and works more than 40 hours in a workweek occurring after December 1, 2016, the Administration’s position is that the worker would be owed an overtime rate of $33.89 per hour.   If the employer fails to pay the required rate when due and is audited by the Wage and Hour Division (in a routine LCA compliance audit or otherwise), the employer likely would be found liable for twice the amount calculated in unpaid overtime under the liquidated damages provision of the Fair Labor Standard.

Given the potential adverse financial impact of such a determination, all affected employers – including employers in the computer and software consulting service industry – should seek legal advice as soon as practicable about their options for limiting wage liability.  For H-1B employers, an FLSA overtime compliance review should be incorporated in the standard periodic compliance review process.  Pivec & Associates, PLLC, a law firm focusing on labor and immigration compliance issues routinely provides such services to employers.