FLSA Overtime Exemption Changes – They’re a Coming!

Changes to the FLSA (Fair Labors Standards Act) regulations are almost here. The Department of Labor published in February of this year that their final ruling will come out this summer – in July. Currently there are five categories in which employees that are exempt from overtime fall into: Executive, Administrative, Professional, Computer (IT), and Outside Sales. The changes the DOL are proposing are concerning the Executive, Administrative, and Professional. For more specifics on those categories, you can visit the DOL’s website here.

Employers need to prepare now for the following changes:

  • The required minimum salary for executive and administrative exemption from overtime would increase-
    • Currently the minimum salary for the overtime exemption is $455 a week, and that would increase almost two-fold: to $970 per week.
  • The salary limit for “Highly Compensated” individuals will increase-
    • Currently the minimum salary for highly compensated employees is $100,000 (in annual total compensation and $455 per week of that is salary) and that will increase to $122, 148.
  • Annual adjustments to these minimums will be tied to changes in the Consumer Price Index.

The time for employers to prepare is now. The DOL plans to audit employer compliance aggressively and before they come knocking on your door, management and HR need to get on the same page and make some changes if needed. These changes to get in compliance means auditing job duties, analyzing workloads, and implement strategies to possibly change employees status and reduce the possibility of overtime. Exempt classifications will now truly have to meet the DOL’s qualifications, or employees may be reclassified as non-exempt with the option of receiving overtime. Employee classifications need to always be examined on a regular basis, including 1099 employees. A recent Utah news article addressed this exact issue. Misclassification of an employee can equate to a costly and lengthy court battle.

KSL (a Utah news outlet) also published a recent new article on how these changes are going to impact the workforce from an employee standpoint. The original proposed amount was an increase from a minimum of $23,500 to $50,440 per year. Most employers barked at the idea of that increase and they’ve settled on $47,000 – for now. If this proposed rule passes, most employees making a salary of less than $47,000 will see a jump in pay with either overtime pay or a change in salary. Check out the link here for the full article.

Given that President Obama’s term is coming to a close while this rulemaking is going on means it may not be in effect in a year, but it’s better to be safe than sorry. Outsourcing to a PEO like Solution Services means that we take care of exempt employee audits and create a manageable solution in compliance with the rules of the DOL without creating an undue hardship for the employer. It’s really a win-win situation! Give us a call today for a free evaluation to see how we can help your business today be compliant with the ever changing employment laws.