In response to President Obama's mandate in March, today the U.S. Department of Labor (DOL) issued a proposed rule that, if adopted, will require employers to pay minimum wage and overtime to nearly 5 million workers who were previously considered exempt under the Fair Labor Standards Act (FLSA). The DOL estimates an average annualized direct employer cost between $239.6 and $255.3 million per year if the proposed rule is adopted.
The FLSA is the federal law that governs minimum wage and overtime pay for all hours worked. Currently, a series of so called "white collar" exemptions may apply where workers are paid on a salary basis. Workers who meet certain duties tests and are paid on a salary basis of at least $455 per week -- or $23,660 per year -- are not entitled to minimum wage and overtime pay. These workers are considered exempt under executive, administrative, professional or outside sales exemptions under the FLSA. A separate exemption currently exists for highly compensated employees who are also paid on a salary basis. To be exempt as a highly compensated employee, workers must be paid at least $100,000 per year, perform non-manual duties, and meet at least one of the duties tests of the "white collar" exemptions.
The proposed rule seeks to raise the salary level applied to the "white collar" exemptions from $23,660 to $50,440 per year. The DOL also proposes an automatic update to the salary level to prevent the amount from becoming outdated. In addition, the DOL proposes to adjust the highly compensated employee salary level. The DOL proposes to increase that threshold salary level from $100,000 to about $122,148 annually. The proposed rule does not currently recommend any modification to the standard duties tests.
Employers have budgets. It is predicted that employers may respond to any rule by making changes to schedules and hourly wages to ensure that the customers are served and costs are managed. It is likely that employers will consider:
The proposed rule has not yet been published in the Federal Register. When published, it will specify the public comment period dates. After the public comment period expires, any issued final rule could take effect 30-90 days after issuance. Stay tuned - employers may be required to comply with a new FLSA rule increasing the number of workers eligible for minimum wage and overtime pay as early as the first quarter of 2016.