Wage and Hour Update: Big Changes to White Collar Exemption

Posted April 12, 2016 Industry Insights, Expert Tips, Company News

A proposed rule that will greatly increase the number of U.S. workers eligible for overtime pay is under review by the Office of Management and Budget (OMB).

While the new wage and hour rules could be released as early as this month or as late as mid-summer, they will have such a large impact that employers should immediately begin to plan around what we know today.

White Collar Exemption: Current Regulations

In general, current regulations exempt employees from overtime pay if they are paid a predetermined fixed salary of at least $455 a week ($23,660 a year) and they perform certain executive, administrative, professional, computer, or outside sales duties.

The salary threshold is not modified annually to account for inflation.

Proposed salary threshold doubles the salary requirement

Doubling the salary requirement will guarantee overtime pay to most salaried white-collar workers earning less than an estimated $970 a week ($50,440 a year).

The proposed rule would set the standard salary level at the 40th percentile of weekly earnings for full-time salaried U.S. workers and automatically update the salary threshold based on inflation or wage growth.

Possible definition for primary duty

It is quite possible the regulators will define “primary duty”, subsequently providing a “bright line” to clarify the percent of time an employee must spend on exempt duties. Some experts recommend employers prepare for a definition similar to what is used in California:

The administrative, executive and professional exemptions require that the employee be “primarily engaged in” the duties which meet the test for exemption. The term “primarily engaged in” means that more than one-half of the employee’s work time must be spent engaged in exempt work.

Modifications to the duties test were not included in the proposed regulations; however, the DOL’s request for comments indicates they are focusing on this provision.

Evaluate your workforce now

Determine whether you have any exempt employees making less than $50,440 a year and prepare for a possible change to the duties test.

If the DOL adopts a test similar to the California test for primary duties, any employee spending less than 50% of the day on exempt work can no longer be classified as an exempt employee.

Review the Primary Duties required of Exempt personnel

Click here to download this Expert Update to see the chart of primary duties for each exempt class that has been outlined by the DOL. This information should help you to get reacquainted with the different exempt classifications and the primary duties required currently for each.

We will update the chart if the regulations change the primary duty test.

 


Please note that the information contained in this document is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.

Additionally, the messages and content within the Pittsburgh Health Care Reform group do not reflect the advisory services of Henderson Brothers, Inc.