The Department of Labor (DOL) has released proposed amendments to the Fair Labor Standards Act (FLSA), which the DOL estimates will impact nearly 5 million employees currently classified as exempt who earn less than $50,440 annually.
Under the FLSA, employers must pay employees minimum wage and overtime for hours worked over 40 in a workweek unless they fit within specific exemptions. The most common are the “white collar” exemptions or executive, administrative, and professional exemptions. In order to fall within one of these exemptions, the employee’s primary job duties must meet the FLSA’s test for exemption and the employee must be paid a certain minimum salary.
The current salary threshold for exemption is $455 per week or $23,660 per year. The proposed amendments would increase the threshold to an estimated $970 per week or $50,440 per year, which, based on Bureau of Labor Statistics (BLS) data, is the projected 40th percentile of weekly earnings for full-time salaried workers in 2016. The proposed amendments would also increase the threshold for highly compensated employees from $100,000 to an estimated $122,148 annually which, based on BLS data, is the projected 90th percentile of weekly earnings for full-time salaried workers. Notably, the proposed amendments establish a mechanism for automatically updating the salary and compensation threshold, which will be indexed to BLS data and updated annually.
The proposed amendments do not change the primary duties test; however, the DOL is seeking comment on this and other topics including allowing non-discretionary bonuses to satisfy a portion of the salary basis test.
The proposed regulations still need to proceed through a period of public comment before the DOL issues final regulations. Public comment is open until September 4, 2015.
In the meantime, employers should begin to plan and prepare for a change to the FLSA’s salary threshold for exempt employees. As part of this preparation, employers should consider an assessment of all exempt positions to determine the impact of the proposed changes. Some employers will need to budget for salary increases and/or overtime costs. In addition, employers may want to prepare or review and revise current job descriptions to ensure they accurately reflect job duties. Finally, employers would be wise to incorporate the FLSA safe harbor language in their employee handbooks.
If you have any questions regarding the proposed amendments or the Fair Labor Standards Act, please contact any of the attorneys at Royal LLP at (413) 586-2288.