Nuts-and-Bolts: Preparing for New Exempt Rules

Last Tuesday, June 30, 2015, the Department of Labor (DOL), acting upon President Obama’s directive, issued proposed rules for significant changes to the exempt classifications. These proposed changes are the first major modifications to the Fair Labor and Standards Act (FLSA) since 2004. You can find the proposed rules and more information on the DOL site here: Proposed FLSA Rule Changes

Two major components of the rule that will affect a large portion of employers in the United States are summarized below:

• Minimum salary level to qualify for the white collar exemptions will be set at 40% of the national weekly earnings for full-time salaried employees ($921 per week or $47,892 annually, but expected to increase to $970 a week and $50,440 annually in 2016). The current federal minimum salary level is $455 a week, or $23,660 annually.
  Note: Workers not subject to the EAP salary level test including teachers, academic administrative personnel, physicians, lawyers, judges, and outside sales workers are not required to pass the minimum wage test to be considered exempt, even under the proposed rules.
  
• Highly Compensated Employees minimum salary to be set at 90% of the national weekly earnings of full-time salaried workers ($122,148 annually). The current federal minimum is $100,000 annually.

While there may be changes to the proposed rules, and there may be some time before these rules take effect, now is the time to start preparing for the changes. Below is a quick checklist that all employers should implement sooner than later.

1. Review and update all exempt positions to ensure that the duties match those in the Job Descriptions.
2. Compare exempt positions duties to the Department of Labor’s and your State’s tests for exempt status (i.e. executive, administrative, professional, outside sales, and computer employees).
3. Create a spreadsheet of your current exempt employee’s salaries, identifying those that are not required to make the minimum salary threshold.
4. Identify any exempt positions whose salary is currently under the proposed salary threshold.
5. Discuss and decide how those positions should be modified to comply with the proposed rule. Generally, the decision would be to either raise the compensation to match the proposed rule or move those positions to hourly. The latter would then require those employees and the employer to track employee’s time and pay overtime in accordance with federal and state law.

You and your HR department don’t have to take on this daunting task alone. HRCentral is here to help by evaluating your job descriptions, identifying which positions will be affected by the proposed changes, and provide advice on the best course of action for those positions. Don’t wait until it’s too late, start planning for the new rules today. Contact us today.