Employers: Get Ready to Pay More Overtime

(June 30, 2015) The proposed regulations released today by the Department of Labor (DOL) aim to increase the salary basis test to $970 per week, or $50,440 per year for a full-time salaried worker.  If finalized as written, the new rules will double the basis for salary exemption, which is currently set at $455 per week, or $23,660 per year.

While the DOL has adjusted the salary basis test a number of times since the passing of the FLSA, the last adjustment occurred more than a decade ago, thus prompting the President to call on the DOL to update again.

Additional changes outlined in the proposed regulations that would have a major impact on Michigan employers include establishing the salary basis test to be benchmarked at 40% of average weekly earnings for full-time salaried employees (as reported by the Bureau of Labor Statistics)  and the highly compensated employee test to be benchmarked at 90% of average weekly earnings for full-time salaried employees, as well as providing for annual updating of the salary basis test and the highly compensated employee test to adjust to the CPI-U.

Somewhat surprisingly, the DOL acknowledged that even in light of such drastic adjustments to the salary basis test, changes to the exempt duties requirements were also warranted. However, the DOL did not propose any specific changes to the duties test.  Rather, it invited comments regarding what, if any, changes should be made to the current test; and whether additional examples applying the exempt duties test to specific occupations should be added to the regulations.

Interested parties have at least sixty days to submit comments to the DOL regarding these proposed regulations.  While these proposed regulations provide a clear forecast that changes to the salary basis test are imminent, it is important to remember that employers are not required to take any action until after the final rules are published.  For now, employers should take the opportunity to review their current exemptions and prepare to make adjustments in the future.

Have questions about the proposed regulations, minimum wage and overtime exemptions? Contact a member of Rhoades McKee’s Human Resource and Employment Law Team.