This summer the Department of Labor’s Wage and Hour Division issued proposed changes to the white-collar overtime regulations under the Fair Labor Standards Act (FLSA). The white collar exemptions include the executive, administrative, professional, outside sales and computer employee exemptions. The focus of the proposed regulations is to increase the salary level required to qualify for the exemption from $23,660 per year to $50,440 per year. The DOL predicts this will cause employers to change the exempt status of nearly 5 million workers who are currently exempt from overtime requirements to non-exempt status – requiring the payment of overtime.
Under today’s regulations, the white collar exemption applies to employees who are paid at least $455 per week ($23,660 per year) and who customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.
The most significant change is the sizeable increase in the minimum salary requirements for the exemptions. The proposed regulations more than double the current minimum salary of $455 per week to $921. This corresponds to the 40th percentile of weekly earnings projected for the first quarter of 2016, based on the Bureau of Labor Statistics. The DOL also proposes annual adjustments to the minimum salary requirements.
The DOL is also seeking to increase the minimum annual compensation requirement for the highly compensated employee white collar exemption from $100,000 annually to $122,148 annually.
The DOL was also tasked with updating the duties tests contained in the regulations to make them easier to apply, but the proposed regulations do not contain any simplifications. Instead, the DOL is asking for comments from the industry on the current duties tests.
These proposed regulations will definitely impact those employees employers consider exempt. Employer will have to again review job duties and compensation to determine whether exempt employees are truly exempt. These regulations, once effective, may mean that you will have to pay some employees overtime or increase their salary to meet the minimum salary requirements. The new regulations are expected to go into effect in 2016.