Proposed Rules on FLSA Exemption: Are They a Game Changer For You?

Proposed Rules on FLSA Exemption: Are They a Game Changer For You?


Classifying your employees as “exempt” or “non-exempt” seems like it should be a fairly straightforward process. But proposed changes likely to be implemented in 2016 could leave employers scrambling to ensure they’re on the right side of the regulations.

Since 1940, FLSA exemption rules were based on three exemption tests:

  1. Duties test: titles and written job description must primarily involve professional, executive or administrative duties as defined by the regulations.
  2. Salaried Basics test: the employee must be paid on a salary basis, not to be subject to reduction due to variations in quality or quantity of work performed.
  3. Minimum Salary test: Employee must be paid a minimum specified amount (currently $455 per week, the equivalent of $23,660 per year and $100,000 per year for Highly Compensated Employees or HCEs).


According to the US Department of Labor (DOL), the proposed FLSA changes look to set the standard salary level at the 40th percentile of average weekly earnings for full-time salaried workers. This would increase the Minimum Salary to $970 per week or $50,400 annually. HCEs would see an annual increase to $122,148. The minimum salary amount would be indexed annually to ensure that it continues to provide “a useful and effective test for exemption,” as stated by the US DOL.

As of now, the proposed regulations do not address changes to the “Duties test.” Currently the DOL is taking comments on this topic, although the final rules may or may not include updates to this test.

The final regulations are expected to be released late this summer and will likely take effect 60 to 90 days later. That is a very short window of time for employers to redesign any employee positions to comply with the “Duties test” if any changes are implemented.

A good place to start now is to look at any current FLSA exemption positions you have between the $455 and $970 weekly salary range and make decisions as to the direction of each position. Have a plan started and ready for implementation so when the time comes, you aren’t scrambling to make changes or exposing yourself to any potential violations.

Even without the pending changes to the FSLA exemption rules, employers will continue to face lawsuits challenging exemption classifications. Employers need to ensure each exemption position satisfies each of the three exemption tests (stated above). Also, with jobs and duties often changing on a regular basis, employers need to spend time auditing these positions on a regular basis to ensure exemption determinations remain accurate. An exempt or non-exempt status when an employee is hired may no longer be accurate several years down the road.

To keep track of any FLSA regulation changes or announcements, be sure to follow Tricom on Twitter, Facebook or LinkedIn, or click on our Legislative Updates link on www.tricom.com.

Source: US Department of Labor, dol.gov
 

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