On June 30, 2015, the United States Department of Labor (“DOL”) released proposed regulations that would modify certain provisions of the Fair Labor Standards Act (“FLSA”), including the so-called “white collar exemptions.” The proposed regulations were published in the Federal Register on July 6, 2015.
Given that the comment period following the DOL’s June 2015 proposed rulemaking closed on September 4, 2015, changes to the FLSA could be issued at any time, although the DOL has indicated that the Final Rule revised regulations are likely to be issued in July 2016.
Below are five (5) key things to know about the DOL’s proposed changes to the FLSA:
- The DOL proposes increasing the salary threshold for exempt employees to the 40th percentile of weekly earnings for full-time salaried workers, or $970/week or $50,440/year in 2016.
- The DOL proposes increasing the total annual compensation needed to meet the “highly compensated” employee exemption to $122,148/year.
- The DOL proposes having a mechanism in the regulation for automatically updating the compensation/salary threshold going forward to ensure that the compensation/salary provides a meaningful test to measure the exemption.
- The effect of these changes will be to increase the number of employees who are entitled to overtime pay.
- Penalties for misclassifying employees as exempt include back wages, liquidated (double) damages, and attorneys’ fees and costs.
Employers are well advised to take steps now to address and prepare for these changes and possibly heightened labor costs. Strategies exist for containing these costs, but they should be tailored to each particular employment situation.