Proposed Overtime Rules May Impact Local Employers

Proposed Overtime Rules Will Result in Tough Operational Decisions for Local Employers

The Department of Labor has released the long-awaited proposed Amendments to the Fair Labor Standards Act (FLSA). The proposed changes will heavily impact businesses in lower-wage rural areas such as Northeast WI. The proposed amendments will significantly increase the minimum salaries which must be met in order for an employee to be classified as ‘Exempt’. The following categories of white collar exemptions will be impacted by the proposed amendments:

*  Executives
*  Administrators
*  Professionals
*  Computer employees
*  Outside salespersons

The FLSA determines an employee’s exemption status by analyzing both the primary duties of the individual as well as the salary of the individual. Exempt status eliminates the need for employers to track hours or pay overtime to the employees who meet the criteria for exemption. The specific duties tests for the employee categories can be found on the Department of Labor’s website at www.dol.gov.

Currently the salary basis test requires that white collar exempt employees be paid not less than $455/week or $23,660 annually. The proposed amendment will increase the salary basis test to $970/wk or $50,440 annually. These proposed regulations more than double the annual salary for an employee to be classified as exempt. In summary, exempt employees currently making between $23,660 and $50,440 will become eligible for overtime wages beginning in early 2016.

Employers should begin considering how these changes may impact their budget and staffing resources in the upcoming year. There are some aspects of the proposal that are in the process of being clarified such as whether bonuses, performance pay, or nondiscretionary compensation can be factored into an employee’s salary. The Department of Labor should provide further clarification to employers on those topics when they issue the final ruling. The final ruling is scheduled to take place in September with the updated salary requirements likely taking effect early in 2016.

Melissa Olsen

About the Author

Melissa Olsen
PHR, Human Resources Administrator & Marketing Coordinator

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