Undoubtedly every HR professional has heard by now that change is coming to the exempt classifications under the Fair Labor Standards Act. The changes we are expecting were provided by the Department of Labor (DOL) for public comment in June 2015. They include:
- Raising the salary threshold level to the equivalent of the 40th percentile of weekly earnings for full-time salaried workers as tracked by the Bureau of Labor Statistics (BLS). DOL estimates that the 40th percentile will increase the salary threshold to $970 per week or $50,440 annually.
- Setting the highly compensated employee annual compensation level equal to the 90th percentile of earnings for full-time salaried workers (estimated to be $122,148 annually).
- Adding a new provision to automatically update the salary levels every year—either based on BLS data or changes to inflation.
Earlier this year, the Solicitor of Labor, M. Patricia Smith, shared that DOL has the authority to make changes to the duties tests as well. Although no specific changes to the duties tests were included in the June 2015 release of the draft changes, there was an opportunity for public comment on:
- Whether exempt employees should be required to spend a minimum amount of time on exempt work.
- Whether the DOL should adopt the California requirement that more than 50% percent of an exempt employee’s time be spent performing exempt duties.
- Whether the DOL should reconsider reinstating a long and short duties test (which existed prior to the 2004 regulatory amendments).
- Whether the DOL should eliminate the concurrent duties rules (allows for performance of exempt and nonexempt duties at the same time).
The final rule revising the overtime regulations could be released by DOL as early as May 2016 or as late as October 2016. Further, it has been strongly suggested by Ms. Smith that the time between the release of the final regulations and the effective date will be particularly short—30 or 60 days.
Given the short time expected to implement the final rule, we urge you to prepare now to address the budgetary and operational impacts of these changes. With this much higher salary level requirement, a substantial number of employees who are currently classified as exempt will be reclassified as non-exempt and will then be subject to the overtime requirements.
Here are some steps you may want to take in preparation of the upcoming changes:
- Confirm that your current job descriptions accurately reflect the actual job duties performed by each exempt position.
- Identify all exempt positions that will not satisfy the salary level test of $50,440.
- Develop a plan for how you will respond. Will you increase the salary to the new minimum or reclassify the position to non-exempt? And, if you reclassify the position to non-exempt, will you maintain the current salary level given the position will now be overtime eligible?
- Talk to your organizational leaders and managers to give them a heads up that these changes are coming. The impact to your organization could be significant.
- Talk to your employees. Let them know you are monitoring the situation and are currently working to develop a plan of action within your organization. There are tough choices ahead, but the more lead time you can provide to your currently classified exempt employees, the greater the opportunity for acceptance of the changes.
Joyce has over 30 years of progressive human resources experience in the private sector environment. She holds a Business Administration degree from Emmanuel College, Franklin Springs, GA; was awarded Senior Professional in Human Resources (SPHR) designation by the Human Resources Certification Institute and holds an Advanced Certificate in Internal Investigations.
She has served on the board of the HR Florida State Council since 2007 and currently serves as Immediate Past President. She has been a member of the Florida State University Center for Human Resource Management Board since 2008 and was a Board Member of the Big Bend Society for Human Resource Management from 2006 through 2009, serving as President in 2008. She served on the Big Bend Business Leadership Network Board from 2005 until 2007 and currently serves on the Springtime Tallahassee Foundation Board. She is a past-president of Extra Point Club, a Florida State University Seminole Booster organization.
Joyce has been named a Tallahassee Volunteer of the Year Finalist and Leon County Schools Volunteer of the Year. She was selected as one of the “Twenty-five Women You Should Know in Tallahassee” and was honored with the designation of the Florida Resources Professional of the Year in 2008. In 2009, the Florida Trend Magazine featured her as a Trendsetter in Human Resources.
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