On July 6, 2015, the U.S. Department of Labor issued the long anticipated proposed regulations making revisions to the white collar exemptions under the Fair Labor Standards Act (FLSA). If the proposed regulations go into effect it is estimated that over 5 million workers will now be eligible for overtime because they will not meet the salary requirements of the proposed regulations.
Currently, under the FLSA, employers must pay certain positions a weekly salary of at least $455, or $23,600 per year, in order for the positions to be exempt from overtime pursuant to the white collar exemptions (Executive, Administrative and Professional exemptions). Also, a separate exemption for highly compensated employees states that they must be paid at least $100,000 annually. The proposed regulations will set the minimum weekly salary at $921, or $47,892 per year. And, the proposed regulations for highly compensated employees set the minimum annual compensation at $122,148. The proposed regulations indicate that these minimum amounts will be adjusted upward on an on-going basis. While the DOL did not include any proposed revisions to the duties tests for the exemptions they did ask for comments on whether or not the duties tests should be modified.
The DOL has taken the approach of setting the standard salary level for the white collar exemptions at the 40th percentile of earnings for full-time salaried workers. For the highly compensated exemption the DOL has set the standard salary level at the 90th percentile of earnings for full-time salaried workers.
What should employers do now?
• Employers can submit comments to the proposed regulations here.
• Plan for the fact that current positions that are exempt will not be exempt in the not-too-distant future purely based on pay. Thus, employers should budget for paying certain positions on an hourly basis with eligibility for overtime.
• This provides a good opportunity for employers to review the exempt status of all their positions. There is always a tug and pull on the exempt classification of positions. Non-exempt employees want to be exempt. Employers want them to be exempt so they do not have to pay overtime. However, the law may say otherwise. In many cases, regardless of the salary requirements, some positions truly do not meet the duties requirements of the law. This is an opportunity for employers to clean up misclassifications.
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