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Employment Blog

Christmas in July?

Authored by Dean R. Dietrich
Posted on March 18, 2016
Filed under Employment

I am afraid to report that many employees will be receiving a significant Christmas present in July.  The latest word is that the new FLSA regulations regarding exempt status will be issued in July and will be subject to a 60-day review period by Congress.  This means we will be faced with addressing the exempt status issue much sooner than anticipated.

As you all know, the proposed regulations would significantly increase the annual salary that must be paid to an employee in order to qualify for exempt status under the Fair Labor Standards Act.  The annual salary will likely be set at $50,400 effective in September and will be indexed to increase every year.  An employee must be paid this annual salary in order to meet the salary test element of a determination that an employee is an exempt employee and is not eligible for overtime pay at the time and one-half rate.  The “duties” test will likely not be amended and will continue as existing in the past although the final version of the DOL Regulations has not been issued publicly.  The Regulations are being reviewed under an administrative review procedure before being published but every indication is that they will be published in July and effective in September. 

The regulations affect every employer that has determined that employees in their company are exempt from overtime requirements because they qualify under the executive employee exemption, administrative employee exemption or professional employee exemption.  The major concern is in the administrative employee exemption area where an individual is part of the management team but may not be paid the higher salary that will be required as of September.  This means the company must either increase the annual salary or treat the employee as an hourly employee and compensate for hours worked in excess of 40 hours per week.  Under that determination, the major concern is off-hours worked which is expected of the administrative employee but not counted toward the 40-hours of work in the past. 

Employers have been waiting for this “bomb to drop.”  The time is coming and employers must pay attention to the exempt status of its employees to avoid overtime pay liability.