After over a year of waiting and wondering, the Department of Labor finally issued its proposed amendments to the white-collar exemptions under the Fair Labor Standards Act. These are often referred to as the salaried exemptions because of the threshold requirement that the employee be paid on a salary basis at a minimum salary level. As you may recall, the impetus for these changes was direction from President Obama that the exemptions were too many employees were being treated as exempt. In other words, the stated goal of the proposed changes was to make sure that more employees will become non-exempt and thus entitled to overtime.
DOL’s tool for effectuating that direction is to raise the required minimum salary for exempt status from its current level of $455 per week ($23,660 per year) to $921 per week ($ 47,892 per year). The proposed changes also affect the qualifying salary for “highly compensated employees,” who are exempt under less rigorous duties requirements. A highly-compensated employee will now have to be paid total annual wages (salary, bonuses, commissions, etc.) of at least $122,148 (an increase from the current $100,000). In addition, the amended regulations will provide for annual updates to the requisite salary levels. Of note, while the currently proposed changes target only the required salary levels, DOL said that it continues to look at whether changes to the job duties tests applicable to each exemption may also be necessary.
While these changes are significant, addressing them should be relatively straight-forward. For currently exempt employees whose salaries are under the expected new level, the employer can raise the salary to meet the expected requirement, or reclassify the employee to non-exempt and pay overtime as required under the FLSA. With reclassification comes options such as whether to pay the employee on an hourly basis or continue to pay the employee via a salary, but with overtime. There are moving parts to this decision, especially going down the salaried non-exempt path, that are best discussed with your wage and hour counsel.
It’s important to keep in mind that while regulatory change is certainly coming, right now these are onlyproposed changes. They will be published in the Federal Register for a 60-day notice period during which time any interested persons may submit written comments for DOL’s consideration. After the notice period ends, DOL will digest the comments, decide if any changes are needed, and then issue the amended regulations in final form (known as a “Final Rule”). The Final Rule will announce an effective date, probably within 30 to 60 days of publication. Given the time it’s taken DOL to issue these proposed changes, it’s hard to tell how long it will take until the final regulations are issued, but a fair guess is sometime in the first half of 2016. Until then, the current $455 per week salary remains applicable.
If you’re unable to sleep, or otherwise interested in reading DOL’s explanation of the changes and the reasons for them (all 295 pages of it), it can be found here: www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf