The Department of Labor’s announced that the final rules regarding the White Collar Exemption Regulations will be published July 2016. As we all know the regulations will become effective 60 days after publication, which is September 2016. The proposed regulations will increase the salary basis test for most FLSA exemptions. We are talking about several million more employees eligible for overtime payments. This will have a significant impact on company’s bottom lines. Each employer will need to evaluate all current exempt employees to determine which ones are impacted by the new regulations. During this evaluation, employers will need to look at the financial impact of raising salaries or paying overtime. It also means employers will need to manage work hours very closely. It is important to begin the reviewing of FLSA emption classifications as soon as possible.
The Department of Labor’s (DOLs) proposed changes to the overtime regulations under the Fair Labor Standards Act (FLSA) in June of 2015. The proposal is now with the Office of Management and Budget (OMB) for final review. There is a period of review, which could be a few weeks, or a few months. The final rule will be published in the Federal Register and most likely take effect with 60 days after publication. So what does all this mean to you?
It is time to prepare for what will happen once the regulation goes into effect.
1. The Impact will be significant – All employees and employer in every industry and sector will be impacted. Employers covered by the FLSA need to analyze classifications and make the changes necessary to comply.
2. Salary Levels will increase – For employees to qualify as exempt from FLSA, today they must make more than $455/week or $23,660/year. The new proposed rule is projected to be $970/week or $50,440/year in 2016.
3. Proposal to automatically raise salary levels – The DOL is proposing to automatically update the salary level (including highly compensated employees) on an annual basis, based on a percentage of earnings for full-time salaried employees or based on changes in inflation.
4. Changes to Highly Compensated Employees (HCEs) – DOL is proposing to set the HCE annual compensation for full-time salaried workers, at $122,148/year in 2016, or based on changes in inflation. An increase of $22,148/year higher than previous levels.
5. Specific State Law Application – Employers in states, such as California, with wage and hour laws that are more restrictive in their application will need to review their coverage requirements under federal law.
6. Reduction in Workplace Flexibility – Employers, will be required to reclassify a significant number of employees from exempt to non-exempt.
Although there are several initiatives introduced to stop this bill, it is better to formulate a plan for implementation just in case.