What does the change in salary test mean to employers?
The salary basis test is the weekly salary an employee must earn to be considered exempt from overtime and FSLA. If an employee does not meet the salary test they cannot be exempt and must be paid overtime. They receive a weekly salary without deductions for the quality or quantity of work performed in the workweek.
First, it raises the minimum weekly salary an employee needs to earn to be exempt from the FSLA.
1. Employers should evaluate their weekly salaries for all employees.
2. All employees earning less than $970 a week will no longer qualify to be exempt from the FLSA. An employee earning an annual salary of less than $50440. must be paid overtime.
3. Evaluate their job duties and hours to determine the correct classification of their position.
4. Develop job descriptions and have employees sign and date the job descriptions.
5. Employers should expect classification audits in 2016 and beyond!
The goal of the Department of Labor is to make 5 million more workers eligible for overtime. This a great opportunity to take a critical look at your exempt positions and ensure that they meet the salary test as well as the duties test to be classified as exempt.
After more than 15 months of waiting, the U.S. Department of Labor has issued a Notice of Proposed Rulemaking (“NPRM”) announcing the Department’s intention to shrink dramatically the pool of employees who qualify for exempt status under the Fair Labor Standards Act.
Department’s intention to increase the salary basis threshold for the white-collar exemptions from $455 a week (or $23,660 a year) to $921 a week ($47,892 a year), which the Department expects to revise to $970 a week ($50,440 a year in 2016) when it issues its Final Rule. By the Department’s own estimate, under this single change to the regulations, which appears at part 541 of Title 29 of the Code of Federal Regulations, 4.6 million currently exempt employees would lose their exemption right away, with another 500,000 to 1 million currently exempt employees losing exempt status over the next 10 years as a result of the automatic increases to the salary threshold.
The NPRM acknowledges that roughly 25 percent of all employees currently exempt and subject to the salary basis requirement will be rendered non-exempt under the proposed regulations. The Department recognizes that employers are likely to reduce the working hours of currently exempt employees reclassified as a result of these regulations and that the reduction in hours will probably lead to lower overall pay for these employees. The NPRM tries to predict how much money these employees will lose, though, in the end, the Department recognizes that it is unable to do so with any precision.
Related changes in the regulations include increasing the annual compensation threshold for exempt highly compensated employees from the present level of $100,000 to a proposed $122,148, as well as raising the exemption threshold for the motion picture producing industry from the present $695 a week to a proposed $1,404 a week for employees compensated on a day-rate basis.