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February 23, 2016
Final overtime rules due in July 2016

By Susan Prince, JD, M.S.L., Legal Editor

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Employers, get ready for a busy summer!

Just when you are about to embark on your summer getaways, dreaming of sun and relaxation … you are probably going to have 60 days to make sure you are in compliance with the Fair Labor Standards Act (FLSA) changes. Well, if you don’t see the sun, the stress of these changes for employers will certainly keep you hot under the collar!

M. Patricia Smith, the Solicitor of Labor, has stated that the Department of Labor (DOL) is looking to publish its final overtime regulations in July 2016. She also stated that the regulations will be effective within 60 days of the date they are published in the Federal Register. That means you will have 60 days to bring your company into compliance with any changes the DOL makes to the current overtime regulations.

The current overtime rules have been in place since 2004, which was the last time the DOL made significant changes to the FLSA regulations. In March 2014, President Obama directed the DOL to modernize and streamline the overtime regulations in a manner consistent with the FLSA’s purpose. The goal is to expand the number of employees eligible for overtime.

On June 30, 2015, the DOL released the proposed overtime regulations in response to the president’s directive and the proposed regulations were published in the Federal Register on July 6, 2015.

The DOL proposes to set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers. This would raise the salary threshold to about $970 a week ($50,440 a year) in 2016. The DOL proposes to automatically update the standard salary and compensation levels annually either by maintaining the levels at a fixed percentile of earnings or by updating the amounts based on changes in the CPI-U.

The DOL also proposes to set the total annual compensation level for highly compensated employees (HCEs) at $122,148 per year to “ensure that the HCE exemption continues to cover only employees who almost invariably meet all the other requirements for exemption.” The current salary threshold for HCEs is $100,000 annually.

In the Notice of Proposed Rulemaking (NPRM), the DOL noted that the salary threshold for exempt status had not changed in 10 years and that the current threshold of $455 per week for the white collar exemptions and $100,000 per year for the HCE exemption were too low by 2015 standards. In addition, adjusting the salary threshold only through formal rulemaking every 10 to 20 years meant that the threshold was quickly outdated.

Many who submitted public comment stated that annual updating of the salary threshold would not give employers enough notice of the salary level increase to budget for the following year. Some felt that an increase every 3 or 5 years would be easier for employers to handle. Maybe there’s a happy medium between 20 years and annual changes?

We’ll see, in July, if the DOL will force employers to go through an annual salary adjustments, or whether the salary level threshold will be updated on a less frequent basis. Regardless, the initial increase in the final regulations will undoubtedly take up a good part of the summer for employers.

Susan PrinceSusan E. Prince, J.D., M.S.L., is a Legal Editor for BLR’s human resources and employment law publications. Ms. Prince has over 15 years of experience as an attorney and writer in the field of human resources and has published numerous articles on a variety of human resources and employment topics, including compensation, benefits, workers’ compensation, discrimination, work/life issues, termination, and military leave. Ms. Prince also served as an expert on several audio conferences discussing the 2004 changes to the federal regulations under the Fair Labor Standards Act. Before starting her career in publishing, Ms. Prince practiced law for several years in the insurance industry and served as president of a retail sales business. Ms. Prince received her law degree from Vermont Law School.

Follow Susan Prince on Google+

Questions? Comments? Contact Susan at sprince@blr.com for more information on this topic.

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