On June 30th, the Department of Labor (the DOL) released proposed revisions to the Fair Labor and Standards Act (FLSA). The FLSA is the federal law that establishes minimum wage, overtime pay, and other standards affecting employees in both the private and public sector. These recently proposed changes focus primarily on overtime salary and compensation levels.
Under the current law, if a worker earned less than the current salary threshold of $23,660 per year, they automatically qualified for overtime pay if they worked more than forty hours in a week. These “white collar” exemptions have been in place since 1940. Generally, in order to be exempt, the position must be paid a salary, the amount of the salary must meet a minimum specific amount, and the job duties must primarily include executive, administrative, or professional duties as defined by the regulations test. The minimum salary requirements had not been revised in over a decade.
Under the new proposed rules, the pay threshold significantly increases. Overtime protections and overtime pay would be extended to employees who make less than $50,440 per year. The DOL reports this represents the 40th percentile and would impact 4.6 million currently exempt workers. Not surprisingly, the resulting cost to employers would be staggering, including actual changes to employee pay as well as associated administrative costs. In fact, the DOL estimates the aggregate cost to employers could be as much as $255.3 million per year. The DOL is also proposing a methodology that would be linked to the Consumer Price index, allowing these salary thresholds to automatically increase with inflation in the future.
These changes, if put into effect, would have a significant impact on businesses and workers alike. Businesses will certainly need to reevaluate their pay structure, and workers may see shifts in hours and salary to address these proposed rules. The rules are anticipated to go into effect in early- to mid-2016 following the public’s opportunity to comment on the DOL’s proposals. If you would like to view the entirety of the proposed changes, you may view them at the DOL’s website, www.dol.gov.