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My good friend Eric Meyer recently wrote that this is the year of the FLSA, and I couldn’t agree more. By now, you’ve certainly read countless articles and blog posts discussing the recently proposed rulemaking that will more than double the minimum salary required for a worker to be classified as “exempt” under the Fair Labor Standards Act. Just in case you’ve been living under a rock for the last month, an employee will need to earn a minimum of $970 per week (or $50,440 per year) and meet the duties test in order to be exempt from overtime wages, increasing from $455 per week ($23,660 per year).
The implications of the proposed rulemaking are fairly clear, but the real question is: what can and should you do going forward?
Comment Early, Comment Often
The proposed rule is subject to a 60-day comment period, which began on July 6th, which means there’s still plenty of time for you to comment. The Department of Labor will review and consider all public comments prior to drafting the final regulations.
Given the importance of the proposed rule, any business that will be affected, which is almost all of them, should take a few moments and leave a comment on the rule. While there is little chance that comments will be sufficient to sway the Department of Labor from raising the minimum salary required, there are other reasons to comment. First, the Department could be convinced to provide exceptions for the new proposed rule, for smaller businesses, non-profits or those with revenue below a certain level. Second, the Department is also looking for input into how the duties test should be administered. Specifically, the Department is looking for public comment on: (1) whether changes should be made to the duties tests; (2) whether employees should be required to perform a certain percentage of exempt work in order to deemed exempt; and (3) whether executive employees should be able to remain exempt when performing exempt and nonexempt duties concurrently.
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Taking a few minutes to leave a comment, explaining how the proposed rulemaking will affect your business and offering your opinions regarding the duties test may help to shape the final rule.
Prepare and Plan
The rulemaking process can take a fairly long time, even after the comment period closes. In 2004, the last time the Department proposed a new rule, it took almost 13 months for the Department to issue a final rule. Anyone potentially affected by the proposed rulemaking should begin preparing for the implementation of the final rulemaking now.
Beginning with a wage and hour audit, either alone or with counsel, is a good start. Not only will a wage and hour audit help you to determine what positions are at risk of becoming non-exempt, but conducting regular audits is a good practice anyway to reduce the risk of an FLSA lawsuit.
Next, you will want to determine whether the employees at risk of becoming non-exempt will, in fact, be working more than 40 hours per week on a regular basis. A few weeks here and there likely won’t affect your bottom line significantly, but a newly non-exempt employee consistently working 50 hours per week is a different story.
If you do have employees at risk of becoming non-exempt, then you will want to consider your options. The simplest option is to pay the employee their current salary and then for any overtime worked. However, if that solution is not financially feasible, you could either forbid non-exempt employees from working overtime or do some math to figure out what hourly rate you can pay your non-exempt employee to ensure your financial outlay remains the same, even with overtime. Regardless of your situation, you will still need to consider your options.
Now that you’ve commented and planned, while others are frantically panicking about the new overtime regulations, you can sit back and know that you did everything you could to ensure that its business as usual for you.