What Employers Can (Probably) Expect from the FLSA Overtime Exemption (Yet to Be) Proposed Rules
With apologies to Tom Petty, with regard to upcoming proposed regulations under the Fair Labor Standards Act set to increase the overtime exemption salary, the waiting is the hardest part. Employers everywhere will likely experience some budgetary change to comply, but it’s hard to know exactly what that change will be. At the same time, knowing what may be coming down the pike can only prepare employers more for how to handle the final regulations when they come into effect.
The genesis of the forthcoming regulation proposals came when President Obama issued an Executive Order to the Secretary of Labor in March of last year to update the regulations regarding overtime exemptions. The White House cited the erosion of the 40-hour workweek coupled with the failure to update the salary threshold to keep current with inflation as grounds for the order. The administration then released the Semiannual Regulatory Agenda, stating that the proposed rulemaking would take place in November of 2014. Three months post-deadline with no rules and it’s looking like even slightly pessimistic appraisals of proposed rules appearing in the first quarter of 2015 might be a tad off.
What we do know is that the current salary exemption of $23,000 (or $455 a week) is expected to at least double. That means that an entire swath of employees who make between $23,000 a year and $56,000 a year will now be subject to overtime pay requirements, regardless of their duties. Employers will need to evaluate just how many employees this will affect and begin budgeting for the eventuality. Not only will the added overtime pay be a necessary expense, the cost of evaluating affected employees should be factored in – it may be quite expensive to conduct an internal audit of FLSA classifications.
Employers should also plan for the exemption for executive, administrative or professional roles to become somewhat more constricted, as many commentators feel that regulations regarding these roles might start to track similar regulations in other states. Those states have a minimum threshold for the amount of an employee’s time that must be performed in a “white collar” role to continue to be exempt.
As to when employers can expect to comply, there’s a bit a silver lining. The rules have to be proposed still, the proposed rules will have a public comment period of at least 30 days, the Department of Labor would have to consider the comments, then the final rule would be then be written, approved and enacted. All told, the process would take at least three months, and likely longer, once the proposed rule drops. We wait with bated breath.