What Employers Need To Know About the DOL’s New Proposed Salary Basis Rules
On July 6, 2015, the U.S. Department of Labor published its long-anticipated proposed new rules establishing a significantly higher minimum weekly payment amount for the “white collar” exemptions to the minimum wage and overtime rules under the Fair Labor Standards Act (FLSA). Here’s what employers need to know about the proposed new rules:
Rather than the current minimum weekly amount of $455 per week or $23,660 per year, the minimum weekly pay amount for an employee to qualify as exempt under the FLSA would increase as follows:
- Executive employees will need to paid at least $970 per week on a salary basis;
- Administrative employees will need to be paid at least $970 per week on a salary basis or a fee basis;
- Creative professional or learned professional employees will need to be paid at least $970 per week on a salary basis or fee basis;
- Computer employees will need to be paid at least $970 per week on a salary basis or fee basis; and
- The minimum annual salary for the “highly compensated employee” exemption will be revised upward from $100,000 per year to $122,148 per year.
The $970 weekly minimum is equal to an annual salary of $50,440 per year. This amount was calculated by taking the 40th percentile for weekly wages for salaried workers in 2013 ($921 per week or $47,892 per year) and adjusting it to account for inflation. The proposed regulations will also mandate additional annual adjustments of the minimum payment requirements to account for inflation on an ongoing basis.
The proposed new minimum weekly payment amount for these FLSA exemptions more than doubles the current minimum weekly amount. The DOL is currently accepting written comments on the proposed new rules through September 4, 2015. After that, the DOL will issue a final rule perhaps in late 2015 or, more likely, some time in 2016 to implement the new requirements.
Takeaway: Employers should start preparing for the DOL’s new salary basis rules to go into effect. In general, exempt employees who are currently paid less than $970 per week will either need to receive a raise to satisfy the new rules, or they will need to start tracking their hours worked and receiving time-and-a-half pay for overtime.