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Overtime Exemption Changes Expected Next Week

On May 4, 2016 by Schnader in Labor and Employment

By Anne E. Kane

The U.S. Department of Labor (DOL) is poised to release the final rules regarding overtime exemption changes.  On March 14, the DOL submitted its final version of the regulations to the Office of Management and Budget (OMB) for review. Although OMB has 90 days to review the rule, we expect it to release the new regulation before May 16 to avoid a situation where the new administration could overturn the rule under a provision of the Congressional Review Act.  Once the final rule is published in the Federal Register, employers will have 60 days to comply.

As a reminder, the minimum salary required to classify workers as exempt is currently $23,660.  This will more than double under the proposed new rule, to $50,440. As we previously discussed here, the DOL maintains that this increase is necessary to preserve the intent of the Fair Labor Standards Act (FLSA) and to simplify the identification of nonexempt employees. The new salary threshold is at the 40th percentile of average weekly wages of full-time salaried employees according to the Bureau of Labor Statistics. The new rule proposes to index the minimum salary to the Consumer Price Index for All Urban Consumers (CPI-U) or maintain it at the 40th percentile of average weekly wages of full-time salaried employees.

In light of the imminent new rules, we recommend identifying employees who are currently exempt but paid less than $50,440. Now is the time to gather information about the number of hours these employees work so that you can make an informed decision about whether to reclassify or adjust salaries prior to the compliance deadline, which will likely be in mid-July.