FLSA Double Time
Last week, the Wage and Hour Division of the US Department Of Labor issued a 219-page Notice of Proposed Rulemaking (NPRM) and accompanying FAQs regarding the regulations defining who is a “white collar” overtime exempt employee.
As a reminder, the white collar exemptions include the Executive, Administrative, and Professional exemptions. To be covered by the exemption, an employee must be (a) paid a salary for all hours worked; (b) the salary must exceed a minimum threshold; and (c) the employee’s position must satisfy a “duties” test that varies by exemption.
In a nutshell, the most significant parts of the proposed regulations are:
- An increase the minimum threshold salary to be exempt from $455 per week to $679 per week (or $35,308 per year);
- Allowing non-discretionary bonuses and incentive payments that are paid at least on an annual basis (if not more frequently) to satisfy up to 10% of that salary threshold (i.e. up to $3,530 per year for the regular exemptions);
- An increase the Highly Compensated Employee salary threshold to $147,414 per year (triggering an easier duties test); and
- No automatic salary increase (the previous failed proposal included an automatic annual adjustment).
To Do List:
If your organization has already adjusted your exempt salary levels to those proposed in the Obama regulations, you are already compliant. Congratulations! Those salary levels are much higher than the current proposal. Your only consideration should be whether you want to comment on the proposed regulations directly or through an organization. You have sixty (60) days from the Federal Register publication to submit comment.
For the rest of you, this is an excellent opportunity for some strategic planning. Many organizations have positions where there is a concern that the position may not be properly exempt from a duties standpoint. One of the dilemmas is how to address that concern in a way that does not invite litigation. Changing someone’s job status to overtime eligible may be viewed as an admission they should not have been exempt to start with. However, a new regulation and salary level may give you some cover for positions making less than the new salary threshold – “blame the regulations.”
If you fit into this second group, you should:
- Immediately assess any low paid salaried exempt positions to determine if you are comfortable treating them as exempt;
- Determine the cost of making them overtime eligible (including any overtime mitigation efforts you intend to employ) and compare it with the cost of increasing their salary and the risk that a fact-finder may determine them to be improperly exempt; and
- Create a communications plan for any changes you intend to implement.
If you need help with this assessment, please visit our Labor & Employment Practice page to find a Lewis Brisbois attorney in your area and we’ll be happy to assist.