Higher Salary for Overtime Exemption?

June 30, 2015

President Obama has announced a proposed rule to increase the minimum weekly salary for overtime exempt employees from $455 to $970.  In other words, the minimum annual salary for an exempt employee will increase from $23,660 to $50,440 if the U.S. Department of Labor adopts the rule and amends the current minimum salary regulations under the Fair Labor Standards Act.

Under the proposed rule, employees who currently meet the “duties” test under the executive, administrative, professional or other exemption but whose salaries are below $50,440 per year will be reclassified as non-exempt from the overtime provisions of the FLSA.  Employers will need to keep time records for these employees and pay overtime at the rate of 1.5 times the employee’s regular rate of pay for each hour over 40 the employee works in a given work week.

Must employers reclassify these salaried employees from exempt to non-exempt?

Not necessarily.  Employers will need to analyze the typical work week for their current exempt employees who will be affected by the new minimum salary threshold and determine the best strategy for the company:  (1) increase the employee’s salary to $50,440 per year ($970 per week) to maintain the exemption or (2) adhere to a regular schedule of not more than 40 hours per work week if the employee is reclassified as non-exempt and pay overtime when the employee works more than 40 hours in any given work week.  In the latter case, if the employee’s weekly hours fluctuate, there may be other compensation methods available that comply with the FLSA and its regulations.

In addition to the new minimum salary threshold for the overtime exemption, the proposed rule increases the annual salary requirement for the highly compensated employee exemption from $100,000 to $122,148, and establishes a mechanism for automatically updating the salary and compensation levels going forward, much like Florida’s minimum wage, which increases annually based on the Consumer Price Index.

After the public comment period, a final rule will be issued and the regulation is expected to become effective in 2016.

According to the proposed rule,the public may submit comments, identified by Regulatory Information Number (RIN) 1235-AA11, electronically or by regular mail as follows:

Electronic Comments: Submit comments through the Federal eRulemaking Portal
http://www.regulations.gov. Follow the instructions for submitting comments.
Mail: Address written submissions to Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210.
Instructions: Please submit only one copy of your comments by only one method. All submissions must include the agency name and RIN, identified above, for this
rule.
Comments received will become a matter of public record and will be posted without change to http://www.regulations.gov, including any personal information provided.

 

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