On August 30th, the U.S. Department of Labor made significant strides in employee wage regulation by issuing a notice of proposed rulemaking (NPRM) to update Fair Labor Standards Act’s overtime exemptions. Employers and legal professionals should take note of these key elements:
- The NPRM suggests an increase in the salary threshold for the executive, administrative, and professional (EAP) exemptions to $55,068 per year. This would present a considerable increase from the current $35,568 annual salary under the ruling.
- With such changes on the horizon, employers should prepare for potential ramifications including a need to raise salaries to maintain exemption status, or alternatively, the re-classification of employees to non-exempt and thus overtime eligible.
- Companies must start planning for these changes now. A proactive approach towards thorough wage and hour audits will help identify potential liabilities and action items. Adjusting budget plans to accommodate for potentially higher labor costs is another prudent step.
- The administrative, executive, and professional exemptions require not just a salary threshold, but also a standard “duties test”. This update is focused on the salary threshold, leaving the existing duties test untouched.
- This is, as of yet, a proposed rule. There is room and time for public comment and potential changes may still occur before it is finalized, thus firms should keep an eye on the ongoing situation.
For more in-depth information about the proposed rule, read the article on JD Supra. Legal professionals, especially those advising corporations, should remain abreast of these proposed changes to ensure comprehensive knowledge about future employment law adjustments. It is recommended to review existing company policies and contracts, making necessary modifications to suit possible future legislation.