On May 18, 2016, the Department of Labor published updated Fair Labor Standards Act (“FLSA”) regulations which go into effect on December 1, 2016. While the new regulations do not amend or alter the duties tests associated with exemption (from overtime) status (i.e. professional, administrative, executive requirements etc.), the minimum salary basis requirement for exemption will increase from $455 to $913 per week or $23,660 to $47,476 annually for a full-year worker. Similarly, the requirement for Highly Compensated Employees' salary will increase from $100,000 annually to $134,004 (the annual equivalent of the 90th percentile of full-time salaried workers). The regulations also provide for automatic updating of compensation levels every three years and are expected to impact nearly 4 million workers. Failure to effectuate these changes will result in liability for unpaid overtime, as well as treble damages.
So what does this mean for you? Now is a good time for employers to take an immediate audit of those employees currently classified as exempt from overtime requirements by reviewing job descriptions, actual responsibilities performed, and current salary level to ensure proper classification. Employers must then determine whether a properly-classified exempt employee's salary needs to be increased to meet the minimum requirements of the new regulation, or if the employer will elect to convert the employee to non-exempt status.
Whatever the decision, employers should begin necessary preparations, including advising employees in writing of their revised salary or any change in their exemption status and being prepared to answer questions of employees who may be confused (or unhappy) about being reclassified.
If you have not begun to consider how this new regulation will affect your employees, please contact Brooke A. Schneider of our employment team or your Withers attorney to discuss implementation and what you need to do to comply before the new regulation goes into effect.