The DOL has now published the new OT rules for employers. The saga of the final FLSA OT rule reminds one of a television drama with employers contesting the prior rule by trying to block it in court back in 2016 only days before it was to be implemented. They were successful and the Judge in that case issued a nationwide injunction against implementation of that final rule. The destiny of the final OT rule hung in the wind while employers everywhere were waiting with baited breath to understand if these final OT rules would ever be issued and when. Finally, the DOL has now answered that question for employers by issuing a proposed notice of rulemaking setting forth what it plans to include in the new final OT rule.
The DOL has set forth that it will make two changes to the final OT rule. It will increase the salary level thresholds for the salary level test from what they currently are $23,660 or $455 per week up to $35,308 or $679 per week. They have also raised the compensation levels for being classified as exempt on the basis of being a highly compensated employee from the current level of $100,000 up to the new level of $147,414. What does this mean now for employers? It means that to classify an employee as exempt under the white collar exemptions, the person still has to meet the three part test, to wit, that they are paid on a salary basis, that they are paid at the requisite salary level, now not less than $35,308 annually or $679 per week and of course that they still meet the duties test previously set forth in each of the white collar exemptions.
The tricky issue for employers now will be what do you do with your employees who are currently exempt meeting all the tests except the current salary test because they are paid $23,660 or $455 per week. They no longer can be classified as exempt under this proposed final rule. Therefore, employers have a choice. You can either choose to raise these exempt employees salary up to meet the new salary threshold of $35,308 or $679 per week so they continue to be exempt or if you don’t do that, you must re-classify them as non-exempt workers and they would now have to be paid overtime for all hours they work beyond 40 in a given work week under the FLSA.
Do employers have to make this choice and comply today? Luckily, no. There is a long comment period now whereby the DOL will seek comments from trade groups and employers and then they will need months to review all those comments as to what employers and others think about the proposed rule. The DOL will then decide if they will make any further changes based on the comments and they will then issue the final OT rule, sometime later this year or early next year. They will certainly give employers a head’s up before the effective date of the final rule so that employers can get their ducks in a row.
The good news for employers is that this new salary level threshold is significantly less than what was proposed under the Obama Administration DOL which was that the worker had to be paid not less than $47,476 or $913 a week to be properly classified as an exempt worker. The DOL also kept the prior change from the old prior final rule whereby it amends the salary basis test to allow employers to include up to 10% of an employee’s salary to come from nondiscretionary bonuses and commissions.
Employers should spend this time consulting with legal counsel to decide whether they plan to raise the salaries of all their current exempt employees to meet these new salary thresholds or re-classify them as non-exempt and now pay them overtime. HR Learning Center LLC can help employers make this decision. We have live webinars on these changes and can provide advice and counsel on this issue as well. Feel free to contact us at 914-417-1715 or firstname.lastname@example.org.