The Fair Labor Standards Act of 1938 (FLSA), which is administered and enforced by the Wage and Hour Division (WHD) of the Department of Labor (DOL) imposes, among other things, minimum wage and overtime pay requirements. It is certainly nothing new and has been a hot topic amongst Human Resources professionals over the past months as President Obama directed the Secretary of Labor to update the regulations. With much speculation and rumblings of possible changes, all have been anxious for the impending proposed rule to be revealed.
The FLSA provides specific exemptions from overtime pay requirements. Though there are others, the most common exemptions are for executive, administrative, professional, outside sales and computer employees who meet certain criteria related to their primary job functions and who are guaranteed a fixed salary at a minimum threshold. The current minimum annual salary for exemption is $23,660, or $455 per week (individuals who meet the requirements of “computer professionals” have slightly different pay requirements). The minimum salary was last updated in 2004 and now falls below the national poverty threshold of $24,008 for a family of four.
After much speculation as to the details of the impending changes, the proposed rule was signed by President Obama on June 30 and appeared in the Federal Register Volume 80, Issue 128 on July 6, 2015. A significant increase, nearly doubling the minimum annual pay to $50,440, or $970 per week is proposed. This change alone is expected to affect virtually every business and five million workers in the first year of implementation. The most obvious impact on businesses is the administrative nightmare of reclassifying the workforce, altering schedules, changing payroll processes, communicating the changes, updating policies and procedures, etc.; not to mention the impending financial implications. Also important to consider is the impact on employee morale as some will lose their exempt status, resulting in a loss of perceived prestige and a loss of flexibility.
Some are relieved that there are no specifics in the proposed rule that would affect the “duties test”, a list of duties provided by DOL that are specific to each exemption classification and are reflective of independent judgement and critical thinking. The test is intended to assist employers in determining if employees meet the exemption criteria. Before celebrating, keep in mind that the proposed rule states “the Department is considering whether revisions to the duties tests are necessary in order to ensure that these tests fully reflect the purpose of the exemption”. The “duties test” clearly continues to be of consideration and it would not be surprising to see changes down the road or even in the final rule. One thing to count on, if changes are made, they will ensure that the exemption is more rigorous to obtain.
The DOL will accept written comments until September 4, 2015. While apprehensively awaiting the final rule, businesses should begin preparing for the changes. Consider who will be affected and how compensation and/or schedules will need to be altered. Though unsure if the “duties test” will be addressed at this time, businesses may want to begin evaluating job descriptions and ensuring they accurately depict the duties of the job. Discuss the impending changes and brainstorm with managers to formulate a plan for effective implementation and communication.
Sheri joined Redstone Government Consulting, Inc. in December 2012 as a Human Resources Consultant. She provides HR consulting services to our customers on a wide range of issues, from specific projects to an ongoing outsourced solution of the human resources function. Sheri has two decades of experience in providing a comprehensive assessment of all areas of HR, including establishing and implementing policies and practices, contract transition efforts/onboarding, and investigations. Sheri’s experience covers a broad spectrum of compensation planning and analysis for total compensation projects, reasonableness assessments including executive compensation, compensation philosophy development, total reward strategies, benefits analysis, market pay and pay equity evaluations. She regularly supports clients with the analysis and mapping of labor categories and the preparation and analysis of wage calculations and supports clients in pricing disputes with DCAA. Sheri has a wealth of experience in navigating the many compliance challenges associated with Service Contract Act and Davis Bacon Act. She has been a valuable resource to our clients in all these areas. She stays abreast of the various requirements of the Department of Labor and, of great importance to government contractors, the Office of Federal Contract Compliance Programs, as well as other federal and state regulations impacting human resources. Professional Experience Prior to joining Redstone Government Consulting, Inc., Sheri served in various roles in the Human Resources arena. While employed by a mid-size government contractor she assisted with database development, recruiting, affirmative action planning and contract proposals. Sheri later became an Employment Specialist with one of the largest employers in Huntsville, where she assisted and led managers in the interpretation and documentation of the progressive disciplinary process, conducted employee investigations and allegations of discrimination, sexual harassment, wrongful discharge and employee disputes, conducted unemployment hearings and conducted new employee orientation. Sheri developed and presented management training, administered facility compensation plan, monitored staffing budgets and wrote job descriptions and handbook revisions.