We have received many questions over the past few months about the Department of Labor (DOL)’s anticipated revisions to the overtime exemption regulations of the Fair Labor Standards Act (FLSA). In June 2015, the Obama administration announced that the DOL will propose extending overtime pay to nearly 5 million workers by increasing the salary levels for “white collar” exemptions. The changes are now pending as the DOL submitted its final rule to the White House’s Office of Management and Budget (OMB) back in March for review.
What could be changing?
The proposed overtime exemption rules are the end result of more than two years' worth of work by the DOL, and the final rule may impact the exempt status of a wide variety of positions in virtually every industry, signifying the most important changes to these regulations in years. Of significant importance is the expected change in the salary requirement for exempt employees. Currently, to be considered for exempt status, an employee must earn at least $23,600 per year, or $455 per week. We expect this number will increase to somewhere between $40,000 and $50,000. We also believe the salary level for the highly-compensated employee exemption will increase from its current level of $100,000 to over $120,000. However, we do not believe that there will be any significant changes to the duties test for exempt employees. The DOL’s own projections indicate that these changes could impact close to 5 million employees across the U.S.
What should you be doing now to prepare?
It is expected that employers will have 60-180 days to begin complying with these new rules, once approved by the OMB. If employers have not already begun the process of preparing for these new rules, they should start by identifying the positions that may be subject to the salary threshold increase. They need also consider how other business operations may be impacted by reclassifying employees to non-exempt status and/or salary increases to ensure compliance. Employers also may want to take this time to determine what, if any, changes need to be made to their payroll and timekeeping systems and whether training is needed on managing employee hours.
NOTE: In May 2016, President Obama announced the DOL’s final rule updating overtime regulations. Please see What will new overtime rules mean for your Texas business? for more information.