You’ve probably heard of the proposed changes regarding white collar exemptions by now. And, as a business owner, you’ve probably exhibited some signs of mild panic: Do I have to make the changes now? Are they for certain? When will the changes take effect?
We’ve heard your questions. The “what’s?” and “when’s?” are our bat signal, so to speak.
We’re here to explain what the proposed changes are & describe the process to come— HR superheroes to the rescue!
So before you start running through the streets shouting expletives into the void, let’s take a look.
First, let’s review the proposed changes…
• On July 6, the Department of Labor (DOL) published a notice of proposed changes to the federal Fair Labor Standards Act (FLSA) rules regarding
the executive, professional, and administrative exemptions (also called white collar exemptions).
• Currently, overtime rules are as follows: employers are required to pay all employees covered by the FLSA time-and-a-half for any hours they work beyond 40 hours in a single workweek. However, executive, administrative, and professional workers (white-collar workers) are “exempt” from this if they:
o Are salaried
o Satisfy the “duties test”
o Earn more than $23,660 per year.
• The proposed changes increase the minimum salary for exempt white collar workers to $50,440 per year, more than double the current number.
• With this increased salary requirement, it’s expected that more than 5 million currently exempt, salaried workers will no longer be exempt.
What does this mean for you as a business owner?
This is a substantial change that will affect most U.S. business owners. That being said, the last time large revisions were made to the FLSA (2004), it took 13 months after the announcement for the final rules to actually be drafted. So it could be a long time before you have to make any changes at your business. (We’ll be sure to keep you posted as any new developments occur.)
Still, since the increase is quite large, we recommend business owners start thinking about how they will handle the new requirements in their organization.
What happens now?
There are three stages in the lifecycle of rules: pre-rule, proposed rule, and final rule. Currently in the proposed rule stage, a few things must happen before the final rule is released.
1. Comment Period
There is currently a 60-day notice and comment period. So, if you feel really strongly about the proposed changes, you can make your voice heard. The deadline for submitting written comments is September 4th. If you’d like to comment, visit this website.
2. Review Comments/Draft Final Changes
Following the notice and comment period, the Department of Labor will take time to review and respond to comments and then draft the final rules.
While you may want to start thinking about how your business will handle the new requirements, it will probably be a good amount of time before you have to make any changes. The process can take months, even years, to be completed. Since a lot of comments and objections are expected, the final rules aren’t expected to be finalized until 2016, possibly even 2017 (although it could be sooner.)
In the meantime, submit a comment if you feel so inclined. Or visit the Department of Labor’s website for more information.
If you’d like to get a jump-start on making sure you’re compliant when it comes to your pay practices, we’re here to help! Learn more about our compensation consulting services here.
Also, rest easy knowing we will keep you updated as the process continues. After all, superheroes don’t take breaks!