Under federal law, employees are entitled to overtime pay for work done in excess of 40 hours in a workweek, unless the employee fits within one of the exemptions. The US Department of Labor (“DOL”) issued a major change to the “white collar” exemption. The current “white collar” exemption applies when the employee performs executive, administrative, professional, and computer-related work, and receives a salary of at least the rate of $455 per week. The changes by the DOL will increase the weekly salary from $455 to $913. Converting the numbers to an annual salary, $455/week equates to $23,660/year and $913/week equates to $47,476/year. The DOL estimated that the change could affect five million employees across the nation.
There also is the “highly compensated employee” version of the “white collar” exemption if the employee receives an annual salary of at least $100,000. The DOL changes will increase this minimum to $134,004.
The changes will take effect on December 1, 2016. What this means for employers is that employees currently exempt under the “white collar” exemption may no longer qualify if their salary is below the new minimum. Those employees will become nonexempt unless another exemption applies, or unless the employer adjusts the employee’s pay to meet the salary requirements. There could be lawsuits and challenges in Congress aimed at the DOL’s new regulations, but an employer should be prepared in case those challenges fail.
An employer should start now by reviewing its workforce for any employees who could be affected by the change in regulations. Employers who have affected employees have choices to make. Those employers need to decide whether it makes sense to change the employee’s salary or job duties, see if another exemption applies, or if the employee is to be nonexempt, making sure the employer complies with the overtime laws. For example, the employer should consider what the employee will do for the employer “after hours,” if anything. The time an employee spends checking work email outside of ordinary business hours could count as time worked.
Getting it wrong can be costly. The federal Fair Labor Standards Act allows the employee who wins in court to recover 100% to 200% of the unpaid overtime pay, attorney’s fees, and costs. State laws often allow employees who win the lawsuit to get damages and penalties on top of the unpaid wages and attorney’s fees.
There is more to the new regulations, and to the law on overtime pay, than what this article covers. An employer should work with qualified and knowledgeable professionals when evaluating whether an employee is exempt and how to structure compensation plans to comply with the applicable laws and regulations. The cost of getting it wrong can be far more than getting it right from the start.
This post provides general information only. This post is not intended as legal advice or to create an attorney-client relationship. Do not rely on this post as legal advice. Laws change and your situation may be different. You should consult with a licensed attorney for legal advice specific to your circumstances.
© 2016 Matthew D. Macy