Dec 1

In July 2016, the United States Department of Labor (“DOL”) plans to implement proposed rules and regulations to extend overtime pay to an additional 5 million employees.

Earlier this year, the DOL announced a plan to essentially double the salary requirement for exempt employees in professional, executive, and administrative positions.  In general, the Fair Labor Standards Act (“FLSA”) provides that employees are entitled to be paid a minimum wage for all hours worked, as well as overtime pay for working in excess of 40 hours in a workweek.  However, the FLSA contains exemptions for certain types of employees, such as professional, administrative, and executive employees (“White-collar exemptions”). Currently, employees who are exempt under one or more of these White-collar exemptions are not entitled to minimum wage or overtime, provided they are paid a weekly salary of at least $455 ($23,660 annually) and perform certain prescribed duties.

The DOL’s proposed new rules and regulations will more than double the salary requirement from $455 per week, to $970 per week ($50,440 annually). The proposed rules also seek to increase the total annual compensation requirement needed to exempt “highly compensated employees” from $100,000 to $122,148.  Finally, the proposed rules seek to establish a mechanism for automatically updating the salary and compensation levels going forward.  These proposed rules and regulations are the result of a Presidential Memorandum signed on March 13, 2014, by President Obama directing the DOL to update the regulations defining which White-collar employees are protected by the FLSA’s minimum wage and overtime standards.

Many business leaders are concerned that the DOL will seek to have these new rules and regulations implemented before the new president takes office in January 2017. If that happens, and the new rules and regulations are implemented in July 2016 as currently scheduled, then employers will not have much time to make changes to their pay plan.  As a result, employers should start planning now for the fact that it will cost substantially more to keep employees exempt under the White-collar exemptions.