The impact of the anticipated Dept. of Labor (DOL) new rule is far reaching and will be very significant. The vast majority of employers that fall under the Fair Labor Standards Act (FLSA) should anticipate reviewing employee overtime eligibility classifications (Exempt versus Non-Exempt) as soon as possible after the rule is published.
The Threshold Salary Level will increase. Presently, to qualify as exempt from the FLSA, employees must make more than $455 a week or $23,660 a year. The DOL has proposed that the threshold increase to as high as the 40th percentile of weekly earnings for full-time salaried workers, which is more than a 100 percent increase and resulting in a doubling the salary test from the current level.
It is anticipated the DOL Rule will periodically and automatically raise the salary level. The Rule will in all likelihood provide for automatic increases in the salary level (including for highly compensated employees) on an annual basis, either based on percentiles of earnings for full-time salaried employees or based on changes in inflation.
The Rule will adjust the Highly Compensated Employee (HCE) exemption upwards. DOL’s proposal is to set the HCE annual compensation level equal to the 90th percentile of earnings, which is $122,148 a year in 2016, and adjusted annually for inflation. Currently, in order to qualify for this exemption, an employee must earn at least $100,000/year.
Workplace Flexibility May Be Reduced. The proposed Rule will require employers to reclassify a significant number of employees from exempt to nonexempt status. Employers must review the need to track hours worked and the resulting impact on workplace flexibility such as telecommuting.
It is never too late to voice your opposition – We recommend all employers contact their U.S. Representative and U.S. Senators and request their support for the various Bills pending in Congress that will nullify the new Overtime Rule.
Rowland & Scott is available to assist employers with assessing the impact of the Rule and compliance once it is published.
Call us at +1 281-825-5595 or email us at [email protected]