Search This Blog

Wednesday, July 1, 2015

Obama Administration Doubles Salary Test – Top 7 Solutions

By: Tommy Eden



The U.S. Department of Labor announced on Tuesday a proposed rule that would raise the minimum salary threshold required to qualify for the Fair Labor Standards Act's “white collar” exemption to $50,440 per year, $970 a week. There is a 60 day comment period for the proposed regulations. There is a 100% chance it will become law in early 2016.

In order to be exempt from minimum wage and overtime requirements under the FLSA exemption for executive, administrative, professional, outside sales and computer employees, under current FLSA regulations, employees have to meet certain job duties-related tests and currently only be paid at least $455 per week—or $23,660 annually.

The proposed regulation calls for rising to equal the 40th percentile of weekly earnings for full-time, salaried workers.  That would bring it to a projected level of $970 per week, or $50,440 annually, by the first quarter of 2016.

While the increase to the minimum weekly salary was anticipated, what was a surprise was the Administration’s proposal to automatically increase the minimum weekly salary requirement each year based on data from the Bureau of Labor Statistics.

While the Department of Labor said it was considering whether to make changes to the duty tests, the proposed regulations do not include changes.

Common Sense Counsel: This Proposed Regulation will be sticker shock for most manufacturing, retail, fast food and millions of small business employers. Follow these 7 steps for some relief and solutions: 1) take a deep breath and let it out slowly as a stress relief exercise; 2) take the Draft Exemption Trial Work Sheet Test and your current job description (better have one) for each of your current salaried exempt employees and see if they truly pass one of the five exempt employee test; 3) for those previous supervisors who are now newly christened hourly employees who do not pass the test, make them a team leader of some kind with an hourly wage rate; 4) for those hourly employees who will work 50 hours a week consider a Fluctuating Work Week or Belo written agreement to lower your overhead cost; 5) for those who do meet the exempt test, and you still want to keep them salaried, then you will have to give them a raise to 50,440 by the first quarter of 2016 and redraft their job description (in-fact you should redraft most of your job descriptions by the end of 2015); 6)  update your pay reporting system and handbook to help you keep day-by-day control of excessive overtime costs; and most important 7) come up with creative ways to engage and incentivize your hourly employees to think like owners.

Tommy Eden is a partner working out of the Constangy, Smith & Prophete, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com with Links to worksheet and regulations on Blog.