It is anticipated that sometime in 2016, the U.S. Department of Labor (DOL) will issue a final rule, overhauling the overtime exemption rules and salary threshold provisions of the Fair Labor Standards Act (FLSA). The DOL first published its proposed rule this summer – which the DOL anticipated would extend overtime protections to nearly 5 million white collar workers within the first year of its implementation. While it is uncertain what differences, if any, will be made between the proposed rule and the final rule, we do know that the final changes to the overtime exemption rules and salary threshold will be significant. Preparing now for those changes makes good business sense.
Here’s what we know:
- The minimum salary threshold for white collar exemptions to the FLSA overtime law will increase. The current salary threshold that “executive, administrative, professional, outside sales and computer” employees must meet in order to be exempt from overtime is $23,660. In the proposed rule, the DOL sought to increase this threshold to $50,440, which sent shock waves through the business community. The final rule (which the DOL will issue after receiving some 270,000 public comments to the proposed rule), may include a somewhat lower threshold, but it will still likely be significantly higher than the current threshold.
- The threshold amount for “highly compensated employees” who are exempt from overtime laws will also increase. In the proposed rule, this threshold increased from $100,000 to $122,148. Again, while we do not know if this threshold will increase by the amount proposed, we do know that this threshold will increase from the current amount.
- Under the final rule, these thresholds will continue to be adjusted upward to keep pace with inflation. This automatic-increase approach is absent from the current rules.
Under the proposed rule, for example, managers who make less than $50,000 per year will be required to be paid overtime for all hours worked over 40 hours in a workweek, regardless if they meet the executive, administrative, professional, computer or outside sales duties tests. While retail, health care and manufacturing industries are expected to be largely affected by this new rule, all employers should give heed to the likely impact of the scheduled changes and prepare accordingly.
Before the new rule takes place, employers should assess the possible impact to their business. Auditing employee compensation, duties and hours worked and developing a strategy for conversions from exempt to non-exempt are good first steps. Kleinbard’s employment attorneys are available to help you undertake these human resources challenges to better prepare for the 2016 FLSA overtime changes. For more information contact Lorena E. Ahumada at [email protected] or 215.496.7227.