Soon, an amendment to the “white collar” exemption under the Fair Labor Standards Act (FLSA) will come into effect, resulting in an increased minimum required salary for many employees. Below, we will review the specifics of the revisions to the FLSA white collar exemption and highlight several concerns for employers and employees as the changes become implemented.
The FLSA is a federal law regulating wage, hour, and overtime requirements. Section 13(a)(1) of the FLSA exempts certain categories of employees from the wage and overtime protections. Under current regulations, bona fide executives, administrative employees, or professional employees (referred to as “white collar” employees) who are paid on a salary basis are exempt from minimum wage provisions. However, the white collar employee must be paid a salary of no less than $455 per week ($23,660 annual salary).
In June of 2015, the Department of Labor (DOL) issued proposed amendments to the white collar exemption of the FLSA. Under the proposed amended rule, the minimum salary for white collar employees would be raised from $455 to $970 per week ($50,440 annual salary). The revised rule also calls for annual increases to the required minimum salary levels that may track inflation and wage growth. If employers fail to meet these salary requirements, the employee may no longer be considered exempt and the employer would be required to meet the minimum wage and overtime requirements of the FLSA.
Because most employees in the white collar FLSA exemption category make more than minimum wage, employers primary concern is the overtime pay requirement. These employees often work more than 40 hours per week. Therefore, the loss of exempt status means that employers may be on the hook for many hours of overtime pay for white collar employees if they are not paid at least $970 per week under the proposed revised rule.
It is believed that the final amendments will be published in July 2016 and go into effect in September 2016. Though many employers have been preparing for this change, those who have not should do so quickly. Employers would be wise to review their payroll and timekeeping records to determine whether they will need to increase salaries to maintain the exemption status of certain employees. A cost-benefit analysis may be performed to determine whether the increased salary would be more costly than closely monitoring employee work hours to avoid overtime. Also, communication is key between employers and employees. As the new rule goes into effect, employees will need to be made aware of employer expectations if the employer chooses to accept a classification change from exempt to non-exempt.
For employees, the new rule could result in a pay increase. If an employee who was previously exempt makes less than $970 per week, employers will be required to pay for any overtime worked by that employee. Under the FLSA, statutory violations of overtime requirements can result in severe penalties and attorney’s fees.
This post was created by Christopher Boline, a commercial and employment law attorney at Dudley and Smith, P.A. Mr. Boline has worked with employers and employees in a wage and hour matters. If you have questions about employment law, please contact Mr. Boline at 651-291-1717 or by email at firstname.lastname@example.org. Dudley and Smith, P.A. is a full service law firm with offices in St. Paul, Bloomington, Burnsville, Chanhassen, White Bear Lake, and Woodbury.
The law is continually evolving and Dudley and Smith, P.A.’s blog posts should not be relied upon as legal advice, nor construed as a form of attorney-client relationship. Postings are for informational purposes and are not solicitations, legal advice, or tax advice. A viewer of Dudley and Smith, P.A.’s blog should not rely upon any information in the blog without seeking legal counsel.
May 11, 2016