Proposed changes by the Department of Labor (DOL) will extend overtime pay to millions of white-collar workers who historically don’t receive additional pay when they work more than 40 hours in a workweek.
The Fair Labor Standards Act, created in 1938, sets specific wage and duty tests that must be met to qualify for exemption from minimum wage and overtime pay. Exemptions apply to qualified executive, administrative and professional (EAP) positions.
The current standard salary level required for exemption is $455 a week ($23,660 annually for a full-time worker) and was last updated in 2004. The proposed rule increases the salary test to $970 a week ($50,440 annually) in 2016. The exemption for highly compensated individuals could move from $100,000 annually to $125, 148 annually. These amounts would be adjusted annually to align with salary percentile thresholds (40th percentile for full-time salaried workers; 90th percentile for highly compensated workers) or changes to the Consumer Price Index.
While the duties test is another key component of making a determination on an employee’s exempt status, the proposed rule does not offer any specific recommendations to modify the duties test. However, during the public comment period the DOL invited input.
Next steps
Employers affected by the proposed amendments should begin preparing for implementation. Steps to consider:
- Identify which executive, administrative, professional positions could be impacted.
- Inform management of the proposed change.
- Review job descriptions to confirm the affected positions are properly classified.
- Determine if salary increases will be awarded or if positions will be converted to an hourly rate and time tracked for overtime purposes.
- Develop a communication plan to explain how the ruling will impact employees once implemented.
If you have questions about the proposed changes, contact Shirley Lind, CEBS, SPHR, at slind@bukaty.com.
