For most workers, the Fair Labor Standards Act (“FLSA”) guarantees a minimum wage and overtime pay at a rate of not less than one-and-a-half times the employee’s regular rate for all hours worked over the standard forty (40) hours per week. However, for certain salaried employees, the FLSA provides a number of exemptions to the requirement of overtime pay. One such exemption, commonly referred to as the “white-collar” exemption, excludes from the overtime requirement certain executive, administrative, and professional employees making above a threshold salary amount. Last updated in 2004, that threshold currently stands at $455 per week ($23,660 per year). In other words, any salaried employee currently serving in an executive, administrative, or professional role (as defined by the FLSA) and making over $23,660 per year, are exempt from the overtime pay requirement.
However, on July 6, 2015, the Wage and Hour Division of the U.S. Department of Labor (“DOL”) issued a proposed regulation to update and expand the white-collar exemption. Specifically, DOL proposes to, among other things, set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers, bringing the threshold salary applicable to the “white-collar” exemption up to $970 per week ($50,440 annually) in 2016. Moreover, the proposed rule would establish automatic updates to this salary threshold. For these updates, the DOL is currently considering two alternate methods: (1) a “fixed percentile” approach tying the threshold salary to the 40th percentile of earnings for full-time salaried workers; or (2) an approach tying the threshold to the Consumer Price Index (i.e., tying it to inflation).
The DOL delayed finalization of this proposed rule in November 2015, setting July 2016 as its target date of implementation. The agency estimates that 4.6 million workers will be newly qualified for overtime in the first year of this new rule.
In order to prepare themselves for this impending increase in the number of salaried employees entitled to overtime pay, employers should consider taking the following steps:
- Update all employee policies;
- Revisit employee classifications (exempt vs. non-exempt);
- Consider lowering the weekly hour requirements for salaried employees that will fall within the newly-proposed threshold;
- Consider pay raises for certain salaried employees, especially those who work well beyond the standard 40-hour workweek and whose current salary is at or near the newly-proposed threshold ($50,440 per year).
The attorneys at Chilivis Grubman work with businesses of all types and sizes in connection with employment-related litigation, including defending lawsuits brought under the FLSA, Title VII, and other employment-related statutes. For any questions, or if we can assist you in connection with such a matter, please contact us at (404) 262-6505 or firstname.lastname@example.org.