How the Department of Labor plans leave employers “So Out of Luck”

Back in July, we wrote a blog about the proposed changes to the criteria for determining who qualifies as an exempt employee.

As a refresher, some of the basic requirements for being classified as an exempt employee include:

  • Having true supervisory responsibility for two or more employees.
  • Being professionally employed in a field that requires expertise in a “learned profession.”
  • Performing “administrative” work that is directly related to the management or general business operations of the employer.

Those criteria are likely to remain unchanged.  What is likely to change is the salary level test – and that’s where the heartburn starts.

Currently, the minimum salary requirement for exempt employees is $23,600 per year.  Most everyone agrees this is a really low bar for someone with exempt level responsibilities.  The Department of Labor has recommended this be increased to $50,440 in 2016 with annual increases going forward.

What does that mean for employers?  If you have an employee earning $35,000 per year who meets the criteria of being exempt, you have two choices:

  1. Increase the salary to $50,440 (including COL increases going forward) or;
  2. Reclassify the employee as non-exempt and pay on an hourly basis with overtime after 40 hours.

Why the big change?  The DOL has posted an infographic on their website which explains their thoughts behind the change.  It’s worth a look.  Here’s the link:

Today is potentially a big day for this regulation.  The DOL has had their say.  Now the rule is currently being reviewed by the Whitehouse which reports having conducted 22 meetings in April alone on this topic.

Predictions?  From what we can tell, the Whitehouse is considering lowering the minimum salary requirement from $50,440 to $47,000.  That’s still too high for many employers, but will send a message to employers that their concerns were heard.

There is also a push to lengthen the implementation period from the 60 day window proposed by the DOL to a one year window as proposed by SHRM.  We have our fingers crossed.

There have been many proposed implementation dates, the most current one is May 16th.  Making this effective on that date would make it harder for Congress to overturn.

What should you do?  Take a look at all of your exempt employees who earn $50,440 or less.  If they are truly doing exempt level work, consider increasing their income to that minimum level.  If not, then you will need to transition them to non-exempt status and ask them to start punching the timeclock.

Becoming non-exempt will bring a lot of workplace changes to employees who have been used to being exempt, but that’s a story for another blog.

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