Handling the Bomb Dropped By The DOL

The U S Department of Labor recently dropped a bomb when it announced dramatic revisions to overtime regulations.  The new regs, which take effect in 2016, put into place new higher minimum salaries for exempt employees, even those who are compensated.  Given this development, one thing is certain:  employees have never had more cause to double-check their job descriptions and pay rates in search of lawsuit fodder.  Is your business ready?

The FLSA generally requires that employers pay employees overtime—at least straight time plus one-half times their “regular rate” of pay for every hour they work in excess of 40 hours in a particular workweek.  The FLSA and its interpretative regulations published by the DOL, however, exempt certain groups of employees from these overtime pay requirements. One such exemption, and by far the most commonly used, relates to employees working in jobs that the FLSA describes as executive, administrative, or professional—the so-called “white collar” exemptions.

In order for employees to fall within one of the white collar exemptions, they must perform executive, administrative, or professional duties (the “duties” test) and make a certain weekly salary (described in the NPRM as the “salary level” requirement).  The regulations also exempt “highly compensated” employees who “customarily and regularly” perform one of the exempt duties of an administrative, executive or professional employee, but who do not otherwise meet the duties test.

The primary change in the DOL’s proposed FLSA rules is an increase in the minimum weekly salary to the 40th percentile of weekly earnings for full-time salaried workers based on Bureau of Labor Statistics data. The DOL projects that the 2016 level will increase to $970 per week, or $50,440 per year.  For highly compensated employees, the threshold will be set to the annualized value of the 90th percentile of earnings for full-time salaried workers, or $122,148 annually.

Smart Tip:  It is estimated that as many as 80% of employers are misclassifying workers.  Given the anticipated changes, now is the time for employers to critically evaluate past practices and make changes, to the extent necessary.  Proactive action can help to mitigate past, present and future risk.