Exempt or Not Exempt: Proposed Changes to the FLSA
July 10, 2015Exempt or Not Exempt: Changes to Overtime Regulations
In March 2014, President Obama directed the Department of Labor to review the current FLSA wage guidelines to ensure that the FLSA salary levels and requirements were suitable. Prior to the drafting of the proposed salary changes from the Department of Labor (DOL), the standard salary level for employees to be exempt was $455/week or the equivalent of $23,660 for a full-time employee. The DOL was originally expected to release these proposed changes by the end of 2014. Employers have been waiting in anticipation to see what the changes would entail.
This week, it happened. On July 6, 2015, the Wage and Hour Division (WHD) of the DOL released their highly anticipated, proposed regulation changes. The proposal specifically addressed increasing the salary levels used to determine exemption. The proposed salary levels would be about $970/week or approximately $50,440 a year. The DOL hopes to index these levels in some fashion to have annual updates. The WHD did not address changing the tests currently used to determine exemption, but did request comments from interested parties on whether the tests are working properly. The WHD has requested that all comments be made by September 4, 2015.
The DOL estimates that these proposed changes will reclassify approximately 5 million employees. It is also estimated that changing the salary levels at which employees are considered exempt will clarify classification for approximately 6 million “white collar” employees. There are currently several “white collar” exemptions that exclude certain types of employees from the minimum wage and overtime requirements. Generally, a three-part test is conducted to determine whether these “white collar” employees are exempt or non-exempt under the FLSA. Some employees, like outside sales individuals, are not subject to the tests and will not be affected by these changes. The proposed changes will also not affect those states that have requirements that are more protective than the proposed federal requirements.
There is still a lot of uncertainty about what the final rules will hold. Based on previous regulatory changes, employers should look for the final regulations to be issued sometime in 2016. Employers should begin to discuss their options and what changes will need to be implemented in their organizations when these amendments (or slight variations of the amendments) are final. Some of these payroll and other employment changes could be significant for business owners.
More information on the proposed FLSA changes can be found at : http://www.dol.gov/whd/overtime/NPRM2015/
Nicole Crump, JD, CIC
Director of Employment ADR
EDR Systems
This information is the opinion of the writer and is not meant to be construed as creating an attorney-client relationship or as legal advice to an individual or business. Please consult your attorney if you need legal advice on the issues above.