Back in June 2015 the Department of Labor’s Wage & Hours Division proposed amendments to the Fair Labor Standards Act (FLSA) Regulations, specifically with regard to the so called “white collar” exemption for executive, administrative and professional employees. The changes have not yet been implemented primarily due to administrative rulemaking procedures that require Notice and comments before final adoption. However, it looks like later this year the new regulations will likely take effect. Proper planning is essential.
The FLSA requires employers to pay employees overtime but exempted certain employees from the overtime pay requirements. One common basis for the so called “white collar” exemption – those employees described as executive, administrative or professional who perform executive, administrative or professional duties and make a certain weekly salary. In addition, “highly compensated” employees who “customarily and regularly” perform exempt duties of administrative, executive or professional employees are also exempt employees.
The proposed change to the FLSA regulations increases the minimum weekly salary that must be paid to remain exempt to the 40th percentile of weekly earnings for full-salaried workers according to data from the Bureau of Labor Statistics (BLS). As of 2013 this number equated to $921 per week or just under $48,000 per year. The 2016 level is projected by the Department of Labor (DOL) to increase to $970 per week or $50,440 per year and the number would then be indexed to the BLS data and updated annually. For highly compensated individuals to be exempt the
annualized value threshold would be set at the 90th percentile of earnings for fulltime salaried workers and is projected to be, in 2016, $122,148 annually.
The DOL is also considering whether nondiscretionary bonuses, commissions and incentive payments should count toward a portion of the salary level test for the “white collar” exemption. However, the new salary levels still will not apply to outside sales employees and professionals such as lawyers, teachers and doctors.
So what will this mean? It is anticipated that many employers will need to budget for salary increases and/or increased overtime costs for at least a portion of 2016. We suggest you work with your legal counsel and complete a preliminary assessment of all positions you currently
treat as exempt in order to assess the impact of these proposed changes in the regulations on your salary structure and workforce. We stress throughout our newsletters, “An ounce of prevention is worth a pound of cure.”
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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