Thursday, July 2, 2015

FLSA Rule Changes Begin

Despite so much activity from the Supreme Court in the last week, virtually everyone also has heard that the Department of Labor announced on Monday a proposed rule that increases the threshold salary for exempt employee status. Currently the minimum annual salary for exempt status is $23,660. Under the proposed rule change, that minimum increases to $50,440. The more than double increase is designed, according to the Department, to compensate for inflation since the original salary minimum was established. The new rule also allows  

Readers of the Workplace Report know that increasing the minimum threshold for exempt status is just one component of the DOL’s initiative to overhaul white collar exemptions. To meet the test for white collar exemptions test, an employee must meet both the salary test and the duties test. The salary test is the subject of the proposed change reported Monday. In order to be  exempt, though, an employee must also meet the duties test of the exemption; in other words their primary duties must be consistent with the exemption. The change in the salary test is only half of what to expect in the coming months.

Not all employees who earn more than $23,660 now are exempt and an increase in the minimum won’t change that. On the other hand, many employers will be affected by the rule change. Employers will have to determine whether they should increase the salaries of employees who are truly exempt by duties to meet the new threshold or to reclassify positions that might not be appropriate to raise to the $50,440 minimum and either pay overtime or restrict the employees’ work hours to 40 in a week. 

In any event, the changes are just beginning. With the expectation of more changes to the rules and the comment and revision period still ahead, the new rules will likely not take effect until January 1, 2016.  Right now, employers should begin the analysis of their currently exempt positions in light of the expected changes and begin to think about how to operate under the new rules.