- Winter Is Coming - But What About Those FLSA Exemption Changes?
- December 1, 2015 | Author: Mary Margaret (Spell) LeBato
- Law Firm: Jones Walker LLP - New Orleans Office
- You may be thinking we're the lawyers who cried wolf since we warned you not once, not twice, but three times that there were imminent changes coming to the requirements meet certain exemptions from minimum wage and overtime under the Fair Labor Standards Act ("FLSA"). We're not - those changes are still coming. But, now that the period during which the public could comment on the proposed rule has closed and the Department of Labor ("DOL") is faced with 270,000 comments, it now looks like the revisions won't go into effect until late 2016 (or possibly even 2017), and we're still uncertain about what those changes will actually look like.
What Changes Are Anticipated?
The DOL has proposed and sought comments on raising the minimum weekly salary required to qualify for certain exemptions from $455 to $970 per week in 2016, which would also automatically increase in future years. The DOL also revealed it's considering whether to revise the duties tests and sought comments "on whether the current duties tests are working as intended to screen out employees who are not bona fide 'white collar' exempt employees." Potentially narrowing exempt duties on top of increasing the minimum salary sends a clear message: the DOL intends to significantly shrink the universe of workers who may be considered exempt. And, the DOL also wanted to hear from employers about the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement. Currently, nondiscretionary bonuses don't count toward meeting the minimum salary to satisfy the exemption (with the exception of inclusion in the total annual compensation for the highly compensated employee exemption, which is currently $100,000 annually but is likely to increase to roughly $122,148).
When Is This Happening?
This is still uncertain. The changes are "proposed" at this time and may be adjusted before taking effect. Initially, these changes were expected to go into effect at the end of 2015 or the beginning of 2016. Then, the DOL estimated the Final Rule would not be released until mid-2016, as the plan was to rely on data from the first quarter of 2016 in setting the salary level. However, the Solicitor of Labor recently shared at a conference that the finalized changes likely will not be issued until late 2016, so they may not take effect until 2017. Apparently the DOL needs more time to finish drafting the revised regulations and attributes this to the sheer volume of comments and the complex nature of the change, which suggests what's coming down the pipeline may be more than just an increase in the minimum salary.
What Can You Do Now?
Given that we still don't know with any certainty what the changes to the FLSA exemption regulations will look like or when you'll have to comply with them, you may think you can take a break from thinking about this. We wouldn't recommend that. Instead, we suggest that you take this opportunity to explore what the impact will be to your workforce and to consult your labor counsel to ensure your company is ready to comply with whatever the changes in the Final Rule will be before you're under a time crunch to do so. For example, you can evaluate the salary levels of your currently-exempt employees. There may be some employees who currently meet the minimum salary of $23,660, but are well below the anticipated $50,440. You may not want to raise their salaries enough to meet the new minimum, so they'll no longer be exempt under the new regulations. It's better to know now who those people are and how you're going to address them when the time comes. You can also take this time to get a better handle on the job duties that your currently-exempt employees actually perform on a day-to-day basis to ensure they comply with the current duties tests and, if not, to consider whether any changes need to be made. If the DOL makes or proposes changes to the duties tests, you can expect those will be more stringent - meaning, if an employee doesn't meet the current tests, the result isn't likely to be different under the revised tests. And, it's always a good time to have your labor counsel audit your wage and hour practices overall and identify any other issues you may have.