The Fair Labor Standards Act (“FLSA”) requires that most employees be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the employee’s regular rate for hours worked over 40 in a workweek.
Section 13(a)(1) of the FLSA, however, provides an exemption from the minimum wage and overtime pay requirements for certain executive, administrative, and professional employees. This exemption is commonly referred to as the “white collar” exemption. In 2015, the Department of Labor (“DOL”) announced major changes to the “white collar” exemption in an effort to increase the number of employees who are eligible for overtime pay. These changes will significantly impact nearly every employer in Kentucky and across the country.
Currently, to qualify for the “white collar” exemption, an employee generally must (1) be salaried; (2) be paid at least $455 per week ($23,660 annually); and (3) primarily perform executive, administrative, or professional duties. The DOL’s proposed changes, however, include raising the minimum salary level to the 40th percentile of weekly earnings for full-time workers. This change would raise the salary threshold to qualify as “white collar” from $455 per week to $970 per week in 2016 ($23,660 to $50,440 annually).
The DOL sent the proposed changes to the White House Office of Management and Budget for final review in mid-March 2016. Experts expect the changes to take effect in just three months. With major changes expected in July, employers should begin to take action now.
Employers should perform internal FLSA audits to determine which employees will be affected by the “white collar” exemption changes. The DOL anticipates that the changes will bring nearly 4.7 million currently exempt employees within the scope of the FLSA’s overtime pay provisions. As part of the internal FLSA audits, employers should consider whether it is necessary to update job descriptions to ensure compliance.
Todd V. McMurtry is a Member at Hemmer DeFrank Wessels, PLLC. He is a commercial trial attorney and Harvard trained mediator. Todd has been married to his wife, Maria C. Garriga, for 28 years. They have three adult children. If you have questions or comments, contact me at [email protected].