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New DOL Rules Regarding Exempt Employees Expected in Late 2016

Earlier this year, the United States Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking which would more than double the salary basis requirement under the Fair Labor Standards Act (“FLSA”).

salary-increase

Currently, an employee can be exempt from the FLSA’s requirements if he (1) performs certain duties (e.g. executive, administrative, professional) and (2) is paid a guaranteed salary of $455 per week (or $23,660 a year).  Under the DOL’s proposed rules, that salary guarantee would increase to around $970 per week (or $50,440 a year), which means that any executive, administrative, or professional employee who is paid under $50,440 a year would no longer be exempt.  In addition, the DOL has also proposed a couple of alternative escalator clauses, which would automatically update the salary threshold amount each year.

Ever since the DOL issued its proposed rules, one of the questions that has been on virtually every employers’ minds is “When are the final rules going to be issued?”   Many employers are trying to set their operating budgets for 2016, and the uncertainty surrounding the timing of the new rules and the new salary basis amount has been a cause of frustration.

At a recent American Bar Association conference, Solicitor of Labor Patricia Smith reportedly stated that the Final Rules are not expected before “late 2016.”  While it is not clear how soon the rules would take effect after they are issued, the federal rulemaking process requires a notice period of at least 30 days, or 60 days for any  “significant” or “major” rules (and to me, doubling the salary basis requirement should certainly be considered significant and major).