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We’re expecting the U.S. Department of Labor’s (DOL) proposed revisions to the Fair Labor Standards Act (FLSA) to be finalized as soon as May or June of 2016. These proposed changes seek to raise the salary threshold required to qualify for the overtime exemption, which the DOL estimates will impact nearly 5 million workers within the first year of implementation.
The impending rule changes were initiated in March of 2014 with a Presidential memorandum directing the DOL to update the FLSA’s wage and overtime standards; the effect of the update would make more employees eligible for overtime pay. In June 2015, the DOL introduced its proposed changes with a comment period open until September 2015. Following nearly 300,000 comments, the DOL sent its final rules to the White House’s Office of Management and Budget (OMB) in March of 2016. It’s expected that the OMB will take anywhere from 30 to 60 days to review and finalize the rules, which will take effect 60 days after its publication. If the OMB issues its final rules in June 2016, employers will have until August 2016 to react to these changes before they take effect.
Before we address the proposed changes, let’s start with the rules as they stand today. Under the FLSA, employees must be paid 1 ½ times their regular pay rate for any hours worked in excess of 40 hours a week. The FLSA does provide a number of white collar exemptions to this overtime rule. To qualify for this exemption, employees would generally need to meet a duties test and a salary test. The current salary test, which hasn’t changed since 2004, requires that for an employee to be exempt from overtime pay, the employee would need to be paid at least $455 per week ($23,660 per year).
The proposed changes, to date, are aimed at the salary test and would make the following changes to the FLSA:
Without much time left to react, employers need to understand these rule changes and how they might impact their business and operations. We recommend, at a minimum, that employers consider the following as they prepare for these changes:
For more information about these changes or to discuss how they might impact your business, please contact us.
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