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Department of Labor Proposes Changes to FLSA Overtime Rules

The Department of Labor issued its proposed amendments to the executive, administrative, professional, computer, and outside sales exemptions (also known as the “white-collar” exemptions) under the Fair Labor Standards Act (“FLSA”) on June 30, 2015. The proposals are a result of direction from President Obama and his concern that too many employees were being treated as exempt. If adopted, the proposals will have a huge impact on employers and their ability to treat certain white-collar employees as exempt from receiving overtime pay. The proposals will only provide changes to the required salary levels; the DOL states it will investigate whether any changes to the primary job duties tests, applicable to each exemption, is necessary.

The Department of Labor’s proposal will more than double the FLSA’s minimum salary threshold. Currently the required minimum salary for exempt status is $455 per week (an annual salary of $23,660 per year). The proposal would raise the minimum salary to $970 per week (an annual salary of $50,440 per year). The White House anticipates these changes would immediately entitle approximately five million additional workers to overtime pay. Additionally, the proposed regulations will provide for annual updates to the requisite salary levels based on inflation and wage growth over time (or other possible metrics the DOL will continue to consider).

These rules will likely not take effect until sometime in 2016. However, employers should start thinking now about how these changes would affect their current workforce and possibly take proactive steps. For instance, employers could raise salaries to meet the expected requirement or reclassify the employee to non-exempt and start paying overtime as required under the FLSA. Employers might also consider shifting schedules to limit overtime pay, or whether to pay an employee hourly or by salary. These changes might also affect time and record-keeping procedures. There are many aspects to these decisions, however, and we suggest consulting your DeWitt employment attorney before implementing any changes.

About the Author

Barret Van Sicklen is an attorney practicing out of our Madison office. He is a member of the Labor & Employment Relations, Litigation, and Real Estate & Land Use practice groups. Contact Barret by email or by phone at (608) 252-9386.

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