Guest Blog Post
On July 6, 2015, the U.S. Department of Labor (DOL) published proposed revisions to regulations regarding overtime exemptions. The proposed regulations were drafted in response to President Obama’s March 13, 2014, memorandum directing the DOL to update the regulations related to the executive, administrative and professional exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act.
In order to be considered exempt under the current regulations, an employee must be paid on a salary basis and a fixed minimum salary per week of at least $455 ($23,600 annually) that is not subject to deductions because of variations in the quality or quantity of work. Employees must also satisfy the duties tests associated with the various white collar exemptions or meet the requirements of a “highly compensated employee” including receiving at least $100,000 annually in total compensation. The proposed regulations would dramatically increase the minimum salary level – to $970 per week ($50,440 annually) for 2016. Moreover, the proposed regulations call for annual “updates” increases to this minimum level based upon either the 40th percentile of all full-time salaried workers as traced by the Bureau of Labor Standards (BLS) or the Consumer Price Index (CPI). The final regulations will indicate which indexing methodology will be used. Historically, either indexing methodology would result in a 2% to 3% annual increase. Under the proposed regulations, the highly compensated employee exemption salary threshold would be raised to $122,148 and be automatically updated annually based on the 90th percentile of all full-time salaried workers.
The DOL did not propose changes to the duties tests but instead sought comments regarding whether further narrowing the scope of the white collar exemptions was warranted (i.e. limiting the percentage of time exempt employees can perform nonexempt work). The DOL is also specifically seeking comments on whether the regulations should be changed to allow nondiscretionary bonuses to satisfy the new minimum salary level threshold.
Comments to the proposed changes must be submitted by September 4, 2015, and may be sent electronically to the Federal eRulemaking Portal http://www.regulations.gov, reference Regulatory Information Number (RIN) 1235-AA11. In the meantime, employers must carefully consider the legal, financial and human resource issue impacts of the proposed changes on the workplace.
If you have any questions regarding the proposed regulations, Jim may be contacted at 419-247-1830 or firstname.lastname@example.org and Sarah Pawlicki may be contacted at 419-247-1701 or email@example.com.