The Fair Labor Standards Act (FLSA) requires most employees to receive overtime pay for all hours worked over 40 in a workweek. The FLSA exempts several categories of employees from the overtime requirement, including executive, administrative and professional employees. However, to qualify for one of these exemptions, an employee must perform certain job duties and be paid a minimum salary which is currently $455 per week.
In 2015, the U.S. Department of Labor (DOL) proposed doubling the weekly salary threshold for meeting the exemption test. The proposed regulations would increase the weekly salary threshold from $455 to estimated $970 ($50,440 annually) and be updated annually. The current salary threshold of $455 per week has been in effect since 2004. According to the DOL, the changes were proposed to restore the effectiveness of the salary-level test, which had eroded due to inflation, and to keep the regulations relevant.
It is expected that the DOL will issue its final rule sometime in July 2016, and will take effect 60 days after the announcement.
In preparation for the final rule, employers should:
- Operate under the assumption that these proposed regulations will be implemented in final form largely without change.
- Review their employee classifications and prepare to adapt to the change in minimum salary for exempt employees. Preparations should include conducting an exemption audit, with which KWGD can help, and determining which currently exempt employees make less than $50,400.
- Prepare to implement the findings of the exemption audit and determine what changes are necessary to remain compliant with the law when it becomes effective. This regulation change will require either raising salaries or reclassifying employees to non-exempt status and the training of formerly-exempt employees and their supervisors on the rigors of timekeeping systems and overtime compliance policies.
It is essential that all employers begin preparing for these changes as soon as possible as an early Fall 2016 effective date is very likely.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.