Federal Department of Labor Reveals Proposed Rule Regarding Salary Threshold for Exempt Employees
On June 30, 2015, the federal Department of Labor (“DOL”) revealed a proposed rule that would raise the minimum salary threshold for “white collar” exempt employees from $23,660 annually to approximately $50,440 annually in 2016.
Under the present FLSA regulations, unless the employee qualifies for a “highly compensated” exemption, employees may be exempt from the FLSA overtime requirements if earning no less than $455 per week (or $23,660 annually) and their day-to-day duties otherwise meet the qualifications of a “white collar” exemption test.
On March 13, 2014, President Barack Obama signed a Presidential Memorandum directing the Secretary of Labor to update the regulations to expand the number of employees eligible for overtime under the Fair Labor Standards Act (“FLSA”). In the Presidential Memorandum, President Obama criticized the level of the salary basis threshold for exempt employees. Employers have been anxiously awaiting the new DOL regulations, which were expected to be issued at the beginning of 2015.
On June 30, 2015, the DOL issued its long-awaited proposed rule updating the FLSA regulations defining and delimiting the exemptions for “white collar” employees. The proposed rule raises the minimum salary threshold for “white collar” exemptions from $23,660 annually to approximately $970 per week (or $50,440 annually) in 2016. The Department is also proposing to automatically update the standard salary requirements going forward to ensure that they remain meaningful tests and do not become outdated in the future.
In addition, the Department is soliciting suggestions for additional occupation examples and is requesting comments on the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement.
Before the proposed rule may be implemented, the rule must be published in the Federal Register and the public must be provided an opportunity to comment on the proposed rule. Although the Office of Management and Budget (“OMB”) has reviewed and approved the Notice of Proposed Rulemaking (“NPRM”), the proposed rule has not yet been published in the Federal Register. The NPRM that appears in the Federal Register will specify the dates of the public comment period and may contain minor formatting differences. Upon publication of the rule, interested parties will be invited to submit written comments on the proposed rule.
Links to the full text of the proposed rule and information related to the procedure for submitting comments may be found at: http://www.dol.gov/whd/overtime/NPRM2015/
In response to the DOL’s unveiling of the proposed rule, interested parties are encouraged to comment on the proposed rule. Employers should also keep apprised of developments related to the proposed rule and its eventual implementation. To the extent the proposed rule is implemented, employers may need to adjust exempt employees’ salaries to ensure compliance with the new salary threshold requirements. If employers are unable to pay exempt employees the increased minimum salary threshold, employers should consider re-classifying exempt employees as non-exempt employees.
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Copyright © 2015 Kimberly A. Sarff, Esq., Quinn Johnston Henderson Pretorius Cerulo