FINAL WHITE COLLAR EXEMPTION RULES ON THEIR WAY: Will Be Published In July 2016, Take Effect Within 60 Days
February 19, 2016
On Wednesday, February 17, 2016, the Solicitor of Labor announced that the long-anticipated changes to the Fair Labor Standards Act ("FLSA") Regulations' "white collar exemptions" will be published in July 2016 and will take effect 60 days thereafter. This latest announcement is considered to put to rest speculation that the Obama Administration would delay implementation until after the November elections.
The DOL proposed the regulatory changes in July 2015 and then provided the public with a 60-day comment period that brought in almost 300,000 comments. Congress has been no less vocal in expressing its opinion. For example, on February 9, 2016, over 100 members of the U.S. House of Representatives sent a letter to the DOL expressing concern over the proposed rules; specifically, the lack of clarity regarding whether the rules will change the duties requirements for the exemptions. The Representatives asked that the DOL reconsider moving forward with the rule as drafted.
In its present form, the rule would more than double the minimum salary required for an employee to qualify for a white collar exemption, from $455 a week to $970. The highly-compensated exemption would also increase from $100,000 a year to $125,148. And both of these numbers would be set to increase based on certain average national salary percentiles. These changes would not, however, take into account regional differences in salary. Despite these massive changes, the proposed new rule does not appear to impact the duties test; however, some believe the final version of the rule will include some changes. This confusion led to Congress's recent letter to the DOL.
The DOL estimates that the new rule would result in roughly 21 million employees no longer qualifying as exempt. The costs of misclassifying workers can be very costly, so employers should be reviewing their employee exemption classifications now, before the new rule goes into effect, to determine which employees will likely become eligible for overtime. Once those employees/positions are identified, you can then begin to address the potential impact (e.g., what the hourly rate will be, whether to increase salaries, etc.) Should you have any questions about the new rule, setting up a wage-and-hour audit, or if you have any other questions about your employment policies or practices, please contact an Elarbee Thompson attorney.