Department of Labor Employee Classifications
Make sure you are compliant with FLSA

On May 23, 2016, the Department of Labor (“DOL”) published its final rule addressing changes to the “white-collar” exemptions under the FLSA, and increases in the minimum salary levels for exempt executive, administrative, and professional employees.  The publication of the final rule was announced by President Obama on May 18, 2016, which is estimated to automatically extend overtime pay protections to over 4 million workers within the first year of implementation.

 

Key Provisions of the Final Rule:

  • The effective date for the final rule is December 1, 2016. Now is the time to plan and take necessary actions.
  • The final rule raises the minimum salary level for exempt employees to $913 per week, or $47,476 annually for a full-year worker. This is the 40th percentile of earnings for full-time salaried workers in the lowest wage Census Region, currently the South. This applies to executive, administrative and professional employees, in addition to certain computer workers.
  • The final rule raises the total annual compensation requirement for high compensated employees (HCE) subject to the minimum duties test from $100,000 to the annual equivalent of the 90th percentile for full-time salaried works nationally, or $134,004.
  • The final rule implements a mechanism for automatically updating the salary and compensation levels every three years, to maintain the levels at the above percentiles, and to ensure that useful and effective tests for exemption continue.
  • The final rule allows non-discretionary bonuses, incentives or commissions, if made on at least a quarterly basis, to constitute up to ten percent (10%) of the minimum salary level for non-HCE employees.

 

Now is the Time to Address Changes - Prepare now for the changes that take effect December 1, 2016:

 

    1. Identify impacted employees in light of the above changes; don’t forget the indirect impact on other employees, even though the rules may not require any change in their status.
    2.  Assess where changes are needed and develop a plan for modification considering the costs and the following options:
      • Reclassification – consider if an employee can be reclassified or if a fluctuating workweek method can be used. 
      • Raise pay – consider whether this is feasible, noting the changes allowing a portion of commissions and nondiscretionary bonuses to be applied to the minimum salary levels.
      • Restructuring – if a large number of employees are affected or significant costs are involved, consider whether it may be necessary to restructure particular jobs or the whole workforce.

Don’t forget that many provisions of the FLSA and the associated regulations remain unchanged. Now is a good time to review current policies and practices concerning overtime work and pay practices, as well as existing employee classifications.

 

 © 2016 McAnany, Van Cleave & Phillips, P.A.

Disclaimer and warning: This information was published by McAnany, Van Cleave & Phillips, P.A., and is to be used only for general informational purposes and should not be construed as legal advice or legal opinion on any specific facts or circumstances. This is not inclusive of all exceptions and requirements which may apply to any individual claim. It is imperative to promptly obtain legal advice to determine the rights, obligations and options of a specific situation.