On June 30, 2015, the U.S. Department of Labor’s Wage and Hour Division, after being prompted by President Obama, announced proposed rule changes that would dramatically affect the salary requirements for employees who are exempt from the Fair Labor Standards Act’s overtime requirements. For nearly 9 months, no action was taken to move the proposed rule change forward. Then, on March 14, 2016, the DOL sent the proposed rule change to the Office of Management and Budget for final approval.
Generally, under the current rules, to be considered an “exempt” employee, an employee must perform certain exempt duties, or “white collar” duties, and be paid a salary of no less than $455 per week (which is not subject to reduction based upon the quality or quantity of the work – i.e., be paid on a “salaried basis”). Under the proposed rule change, the amount required to satisfy the salary basis test would more than double. Under the proposed rule, the amount required to meet the salary requirement for an exempt employee would rise to an amount equal to the 40th percentile of weekly earnings of full time salaried workers as determined by the DOL’s Bureau of Labor Statistics (an amount estimated to be $970 per week or an annual salary of $50,440). The proposed rule would also raise the amount paid to an employee to qualify for the highly-compensated employee exemption and would also establish mechanisms for automatic increases to the salary requirements in order to meet the exemption’s requirements. In this article, the Society for Human Resource Management (or SHRM) provides a link to important source documents regarding the rule change, including the DOL’s notice of the proposed rule change, a letter from Members of Congress expressing concern over the changes, and a link to the OMB site showing that the proposed rule has been forwarded to the OMB for approval. The OMB review may take one to two months. In the meantime, it is possible that Congress may take action.