Increased Exemption for White Collar Employees

Authored By THEODORE T. STORER

The Change

Employers who pay employees a salary may have to increase the compensation paid or start paying overtime. New rules expected to be issued for comment in 2015 will dramatically expand the number of white collar workers eligible to receive overtime compensation.

What does this mean?

Overtime compensation is required for many employees who work more than 40 hours in any one work week. Most employers consider white collar salaried employees to be exempt from this requirement.
But simply paying an employee on a salary basis is not enough to avoid overtime. The duties of a salaried employee must fall within a specific exemption and the employee must be paid more than $455 per week. The U.S. Department of Labor (“DOL”) has explained the current exemptions here:
//www.dol.gov/whd/overtime/fs17a_overview.pdf
These requirements were last updated more than ten (10) years ago. The current administration has announced that the weekly salary requirement is under a comprehensive review in an effort to catch up with current economic times. The proposed rules will more than double the weekly salary requirement to $921 per week if adopted.

Who will be impacted?

The new salary requirements will impact the exemptions for the executive, administrative and professional exemptions. Other exempt positions are not subject to the salary requirement, including outside sales employees, teachers, doctors and lawyers.

How many will be impacted?

Estimates show that nearly five (5) million workers currently paid on a salary basis may become eligible for overtime if new rules from the DOL are adopted. The DOL issued a factsheet about the proposed rules that can be found here:
//www.dol.gov/whd/overtime/NPRM2015/factsheet.htm.

It is further estimated that more than 100,000 Hoosier workers may be impacted, as provided here:
//www.indystar.com/story/news/politics/2015/07/02/new-ot-rule-affect-indiana-workers/29646383/

When will the change take place?

The DOL has not yet issued a final rule. The new rules are expected to be issued for comment this year, but will likely not take effect until 2016.

Action Item:

Employers should consider proactively reviewing salaried positions now. If the positions do not meet the descriptions or the anticipated salary requirements, employers have time to modify the roles and to reassess the position in their business model.

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