The Fair Labor Standards Act which was passed in 1938 may see a significant revision if a current proposal comes to fruition. The “white collar” exemption of that Act, requires a position to meet three specific criteria to be exempt from overtime pay:
(1) The employee must be paid a salary.
(2) The amount of the salary must meet a minimum specific amount; the amount has been increased many times since its inception and is currently $455 a week/$23,660 a year.
(3) The employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations tests.
In a nutshell, the DOL proposed regulations will change number two, the salary level test, by increasing the minimum salary a job must pay to be exempt from $455/week to a new, indexed salary rate projected to be $970/week ($50,440/year). In simple terms, if a salaried individual making less than $50,440 works more than 40 hours in a week, that employee must be paid overtime on the excess hours.
Employers will have three options if this proposal becomes the law of the land:
(1) Increase the salary of the exempt employee to the new threshold of $50,440 per year.
(2) Limit the employee to 40 hours per week.
(3) Pay time-and-a-half overtime for any time worked over 40 hours in a week.
Employers with a significant amount of salaried employees between $23,660.00 and $50,400.00 will face substantial heightened labor costs by adopting one of these options. It is important to note at the time of this writing this is still a proposal. It is anticipated the law could be in place sometime in 2016.
If you have questions about how this may impact your specific situation, please contact our office.