May 16th, 2016

New Regulations on Exempt Employees Launching This July

Click here to read the latest update on these new rules here.

In response to the directive of President Barack Obama, the U.S. Department of Labor (“DOL”) announced that it will be publishing new regulations in July 2016 concerning the Fair Labor Standards Act (the “FLSA”). The proposed new regulations relate to the FLSA white-collar exemption regulations, which address minimum wage and overtime pay protections for executive, administrative, and professional employees, and will significantly raise the threshold for these employees to qualify as exempt from overtime pay requirements under the FLSA.  As a result, many employees will be subject to reclassification as non-exempt and will become eligible for overtime pay for hours worked in excess of 40 hours in a workweek at the rate of one and one-half times the employee’s regular rate of pay.

Presently, employees qualify for the white-collar exemption if they are paid on a salary basis; the salary is at least $455 per week or $23,660 annually; and their primary duties are consistent with executive, professional or administrative definitions as outlined by the DOL. The proposed new regulations will more than double the salary threshold by raising the salary requirement to $50,440.

The DOL has indicated that the proposed new regulations will go into effect sixty (60) days after their publication, which means employers must address any changes in the status of their employees by September 2016.

In anticipation of these changes, employers should review their FLSA exemption classifications and assess which employees may be affected by the proposed new regulations. To the extent an employer must reclassify employees from exempt to non-exempt in response to the proposed new regulations, there will likely be a corresponding impact on the employer’s business costs, including payroll.  To minimize any financial burden, employers should consider raising the salaries of these employees in order to meet the new salary threshold.  Alternatively, employers should contemplate the adoption of policies and procedures in order to more closely manage the work hours of employees who become eligible for overtime.  Such policies and procedures could include the elimination of remote access to work email or computer systems or the implementation of timekeeping systems.

Attorney Loren Speziale counsels large and small employers on policies, handbooks, contracts, and litigation avoidance.

The content found in this resource is for informational reference use only and is not considered legal advice. Laws at all levels of government change frequently and the information found here may be or become outdated. It is recommended to consult your attorney for the most up-to-date information regarding current laws and legal matters.