FLSA White Collar Exemption Changes

What the Proposed Changes to the FLSA White Collar Exemption Mean for Your Business

If you have heard about the proposed rule changes to the Fair Labor Standards Act (FLSA) white collar exemptions then you are probably upset. This blog will do nothing to help that. What I will do is break it down for you and tell you what the impact may be for you, your employees and your business.

What are the White Collar Exemptions?

Simply put white collar exemptions provide exceptions to minimum wage and overtime for employees.  In order for an employee to be subject to the exemption they must meet two criteria:

1. Hold a position that falls under the FLSA’s classification of administrative, executive, professional, outside sales, and computer employee. A word of warning here, simply giving an employee the title of “administrative” does not mean they fall under the exemption.  This is a common misconception and notorious pain in the you-know-what for many employers.
2. Meet the Salary Basis Test meaning that the employee is paid a minimum salary of $455/week or $23,660/year.

How is this supposed to change in 2016?

The new rule proposed by the DOL on June 30^th of 2015 would increase the minimum salary level to $970/week or $50,440/year AND the minimum salary requirements will be automatically updated annually to keep them in step with current wage trends.

BUT WHY?

Essentially, the DOL feels that the exemptions are being used and abused by employers and in some cases they may be right – you know who you are.  This is their attempt to tame the wild west of minimum wage and overtime exemptions and smoke out those who have been improperly stamping “Exempt” on the forehead of every employee that walks through their door.

What is the impact for me?

Employers will need to re-evaluate all employees’ status as this change will more decisively separate your exempt from your nonexempt employees. Even if you have been careful to classify your exempt employees in accordance with the FLSA, they may lose their exempt status and become eligible for overtime because of the new salary minimums.  I told you this wasn’t going to make you feel better so here’s a picture of a puppy driving a car, it’s the least I can do.

Questions? Contact me at bkingsbury@clark-mortenson.com or 877-352-2121.