Proposed Changes in the Fair Labor Standards Act

On Monday, July 6, 2015, in response to a March 2014 executive order signed by President Obama, the Department of Labor (DOL) published a “Notice of Proposed Rulemaking”, which is a 60-day period for comments on the proposed changes to the current duties tests under the FLSA.

Sandra Hoyle-Smith, SPHR

Sandra Hoyle-Smith, SPHR

 

What does this mean for you and your business?  The proposed change increases the minimum salary level for exempt employees from $23,660 to $50,440.  This means that any employee currently making less than the $50,440 would be considered as nonexempt and will therefore be eligible for overtime pay. 

Employees making $50,440 or more and whose job duties primarily involve executive, administrative, or professional duties as defined by the FLSA duties test, will be considered exempt from overtime pay.  The proposed rule also includes an increase in highly compensated employee (HCE) annual compensation to $122,148.  At this time the proposed rule does not include any other changes to the duties tests.

The proposed rule comment period ended on September 4th.  According to the experts, the consensus is that the proposed rule will go forward at the $50,440 minimum salary level and will become effective in early 2016.

What to do now:

As you are preparing your budget for 2016 you will want to do the following:

  1. Include additional overtime pay for those employees who will change to nonexempt because of the proposed rule.
       a.  Ask your current exempt employees who will change to nonexempt because of the proposed rule to track their hours worked each week.  Have them do this for a month and then calculate the average number of hours worked.
       b.  Multiply the average hours over 40 hours by one-and-a-half times their current hourly rate.
       c.  Add up the overtime for all those employees and include this to your budget, or if the amount is excessive, it may be you will need to add an additional headcount.
  2. You may have some employees whose salary is close to the $50,440, or because of the additional overtime pay, you may want to give them an increase in their base pay in order to get them to the $50,440 so that they will keep their exempt status.
       a.  Add up all of the salary increases and include these in your budget as well.

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