The Department of Labor’s much talked about proposed overtime rule, which would make nearly five million additional workers eligible for overtime, was published in the Federal Register today, July 6. The proposed rule would amend the Fair Labor Standards Act regulations by more than doubling the minimum salary threshold for the exemptions covering “white collar” employees, including certain executive, administrative, professional, outside sales, and computer employees. The administration is hoping the changes will result in higher wages for millions of workers. The impact the proposed rule will have, of course, is up for debate.
The Proposed Change
Currently, under federal law, employees must perform certain job duties and receive a salary of at least $455 per week to qualify as exempt from overtime. The minimum salary threshold of $455 per week (which is the equivalent of $23,660 per year) was last updated in 2004. The DOL noted that the regulations haven’t kept up with the cost of living, noting that $23,660 is below the poverty level for a family of four.
Under the new rule, the minimum threshold to qualify for the “white collar” exemption is projected to rise to $50,440 per year. The administration believes that many workers (think lower-level managers) are working over 40 hours a week but some are making only $25,000 a year. These lower-level manager-type employees would be entitled to receive overtime pay under the proposed rule.
What to Do
Don’t worry … yet. The proposed overtime rule is not final. For the next 60 days, interested individuals are able to submit comments. Based on the comments received, the DOL can decide if and how to amend the rule. Either way, it will likely be 2016 before any final rule becomes effective.
In the meantime, employers who want to be proactive and stay ahead can evaluate their payroll now to get an idea of how many of its employees may need to be reclassified as non-exempt under the higher salary threshold. Depending on the preliminary results, employers may also want to consider whether a change in scheduling will be needed and also begin preparing a communications plan to inform employees of their new exemption status.
This proposed rule may be the first of many coming changes to the FLSA, which this administration has hinted at for several years, including raising the federal minimum wage. Other related notables include:
- The rule proposes to automatically update the minimum salary level on a periodic basis. The DOL is asking for comments on the best method to use for these automatic updates.
- Highly compensated employees may also be effected by the rule. The DOL is asking for comments on whether the salary level should be increased from $100,000 to approximately $122,000.
- The proposed rule does not revise the job duties tests for the “white collar” exemption, but the DOL has stated it is not sure whether these changes are needed and has requested comments.
Texas wage and hour law generally tracks federal law, so Texas employers will want to ensure they follow the developments.