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Increase to Exempt Status Salary Requirement Proposed

Yesterday evening, President Obama proposed an increase to the overtime salary threshold, revealing the main aspect of the upcoming proposed rule changes for the white collar exemptions of the federal Fair Labor Standards Act (FLSA). According to the president, the annual salary requirement for an employee to be considered exempt will increase from $23,660 to $50,440. This more-than-doubling of the salary requirement would mean that approximately five million workers who are currently exempt from overtime and minimum wage requirements would no longer qualify for an exemption.

Once the proposed rules are officially released, there will be a public comment period of 60 days. The Department of Labor (DOL) will then review and respond to comments and draft final rules. This stage can also be a lengthy process. The last time large revisions were made to the FLSA, in 2004, 13 months elapsed between the introduction of the proposed rules and the release of the final rules. As before, we expect a large number of comments and much opposition from the business sector, and therefore a similarly long span of time before the rules are finalized.

It will likely be mid-to-late 2016 or even early 2017 before any changes to the FLSA white collar exemptions go into effect. But, given the sizeable increase to the salary requirement, we recommend employers begin to consider how they will handle the new requirements in their organization. In addition to planning for many employees to go from exempt to non-exempt status (requiring planning for paying overtime), employers should think about the costs associated with reviewing the exempt status of current employees.

President Obama’s statement can be found here, and additional information from the Department of Labor can be found here. We will continue to follow this issue and update you as we have more information.

Content provided by TPC HR Support Center.