In July 2015, the United States Department of Labor (DOL) issued a proposal to significantly increase the minimum salary level necessary to classify an employee as an exempt administrative, professional, or executive employee. While the changes were initially expected to take effect in January 2016, the DOL recently indicated the final rules likely will not be issued until "late" 2016.

To be exempt, employees will still be required to meet the particular "duties tests" for the administrative, professional, or executive exemption. The proposed rules do not modify these duties tests, but it is possible the final rules will contain changes to the tests. The DOL's proposed rules increase the minimum weekly salary for exempt employees from $455 per week ($23,660 annually) to $970 per week ($50,440 annually). If the proposed rule is adopted and an employee is not paid the new minimum salary ($970 per week), an employee must be classified as nonexempt and paid overtime for all hours worked in excess of forty hours in a workweek.

Once the final rules are issued, employers may only have thirty to sixty days to comply with the new rules. Many observers believe the DOL will want any final regulations to take effect before the presidential elections in November 2016.

With prospects high that final rules will be issued in 2016, employers should start their compliance planning immediately. We suggest first identifying all positions currently classified as exempt and preparing to either pay these employees overtime pay or adjust their salaries to meet the new proposed salary levels. It is also important to determine how employees are likely to respond to the changes and the potential that they might be reclassified from exempt to nonexempt. Many employees like being classified as exempt because of the flexibility offered in their work hours and the status associated with being "professionals" and treated as exempt employees. For those employees that will become nonexempt under the proposed rules, it is important to review timekeeping practices to make certain those employees qualify for minimum wage and overtime pay, and are now recording their time on a daily basis. The Fair Labor Standards Act does not allow employees to waive the requirement that they be paid overtime and minimum wages.

The new rules might also make some employers consider layoffs, reorganizations, or outsourcing of certain departments or jobs. These changes usually take substantial time to finalize and implement, so it is critical to start analyzing these possibilities now.

If you have any questions about the proposed overtime exemption rules or wage and hour compliance issues, please contact¬†Harvey Cooper at [email protected] or call (402) 392-1250.