The proposal seeks to update the current regulations that govern which executive, administrative, and professional employees are exempt from the Fair Labor Standards Act's minimum wage and overtime pay protections. The DOL last updated these regulations regarding white collar workers back in 2004.
The proposed rule will, if enacted, raise the minimum salary threshold required to qualify for exemption from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements.
The proposed regulations focus primarily on updating the salary and compensation levels needed for white collar workers to be exempt. Specifically, the DOL proposes to:
The proposed regulations also ask for:
The Department is not proposing specific regulatory changes on either of these issues at this time.
What do these updates mean for California employers? The proposal would raise the salary threshold from $455 a week,the equivalent of $23,660 a year, to about $970 a week, or $50,440 a year, when finalized in 2016.
Since 2004, when the “white collar” exemptions were last amended, employers have seen an explosion of litigation under the Fair Labor Standards Act (FLSA). The number of FLSA cases filed in federal courts has more than doubled, and the DOL’s Wage and Hour Division also has increased its compliance audits and investigations of wage complaints in recent years.
These lawsuits have become increasingly costly for employers. In addition to government enforcement, a successful private litigant can recover payment of any back wages or overtime going back up to three years (longer under some state laws), liquidated damages of up to 100% for willful violations, and reasonable attorneys’ fees and costs.
According to The National Law Review, the DOL’s proposed changes "will likely only trigger more activity by private litigants and federal and state agencies. Employers that have not done a classification audit in the past several years may be particularly at risk and would be wise to consider the following practice pointers concerning worker classification:
The next step in the rulemaking process is publication of the proposed rule in the Federal Register. The proposal will then be subjected to a comment period of sixty days. Thereafter, following review of the comments, the DOL will publish a “final rule” that may differ from the proposal issued today.
The effective date for the amended regulations will most likely be sometime in 2016.
The proposed regulations are available for review at www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf.
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