By: Tracy M. Evans, Esq., Associate, Saxon Gilmore & Carraway, P.A.
Last year, President Obama ordered the Department of Labor (“DOL”) to revise the current white collar overtime exemption regulations, with the intent of increasing the number of workers eligible for overtime compensation. On July 6, 2015, the DOL published a proposed rule in the Federal Register, 80 FR 38515, which will extend overtime protections to nearly five million white collar workers. Proponents of the proposed rule view it as the first step in ensuring fair compensation for hard-working Americans. Businesses and employers, on the other hand, may find the proposed rule’s effects very costly.
Under current regulations, full-time, salaried employees who primarily perform the duties listed under the current regulation’s executive, administrative, professional, or computer employee exemptions, who make more than $455 weekly ($23,660 annually), are exempt from receiving overtime. The proposed rule increases this threshold salary requirement to $921 per week ($47,892 annually) for each of these exemptions, which would effectively expand the number of employees eligible for overtime pay. In addition, the proposed rule increases the total annual compensation requirement for the highly compensated employee exemption, which applies to employees whose primary duties include performing office or non-manual work, and who also perform at least one of duties listed under the executive, administrative, or professional exemptions. Under the current exemption for highly compensated employees, the threshold salary is set at $100,000 annually. The proposed rule seeks to increase this threshold to $122,148 annually. The proposed rule also establishes a mechanism to allow automatic updates to these salary thresholds based on inflation or wage growth over time.
Interested parties may submit comments regarding the proposed rule at www.regulations.gov, on or before September 4, 2015. It is important for the DOL to hear how the proposed rule will affect businesses, including how many employees will require reclassification and salary increases, and how much the proposed changes will cost businesses.
It is estimated that the rule may be finalized as early as July 2016, and the rule could take effect by the end of 2016. Therefore, employers should begin preparing for the changes by identifying which employees will require reclassification, and determining the anticipated cost associated with these changes. Employers may then want to look at ways to redesign and restructure current compensation plans to minimize these costs as much as possible.
Our firm will continue to track and report on the proposed rule’s progress, and will ensure our clients stay informed of these important changes.
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