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Friday, April 8, 2016

$50,440 Minimum for Exempt Employees One Step Closer

By: Thomas Eden

On March 14, 2016, the Department of Labor (DOL) moved another step forward with the requirement that all exempt employees be paid at least $50,440 annually in order to meet the initial requirement under the Salaried Exempt test. On July 6, 2015, the DOL published a Notice of Proposed Rulemaking to update the regulations defining the exemptions for “white collar” employees under the Fair Labor Standards Act. The DOL’s proposed rule would increase the salary threshold for exempt workers from the current $23,660 to $50,440 annually, an increase of more than 113 percent. After that, the threshold would be automatically adjusted each year to provide what the DOL described as a “useful and effective test for the exemption.” Over 300,000 comments were received by the DOL.

The next step in the regulatory process was for the DOL was to send the final version of the regulations to the White House Office of Management and Budget (OMB) for review. On March 14, 2016, the DOL did just that. The OMB review period typically is 30 to 90 days. The 90-day period ending in mid-June is consistent with a prediction of an effective date early in the third quarter. Once the OMB gives its approval, the DOL is free to publish a final rule.

After the final regulation is published, the Congressional Review Act allows Congress 60 legislative days to review the regulation and enact a disapproval motion. For the regulation to be invalidated, the Congressional resolution of disapproval either must be signed by the President, or must be passed over the President's veto by two-thirds of both Houses of Congress; a non-starter for this administration.  So in reality there is no chance to stop it from becoming effective.

Common Sense Counsel: Follow these 5 steps now for some relief and solutions in June 2016: 1)  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; 2) for those salaried who will become hourly employees working 50 hours a week, consider a Fluctuating Work Week written agreement to lower your overhead cost; 3) for those who do currently meet the salary exempt test, and you still want to keep them salaried, then you will have to give them a raise to 50,440 by the third quarter of 2016 and redraft their job description; 4)  update your payroll system and handbook to help you keep day-by-day control of excessive overtime costs; and most important 5) come up with creative ways to engage and incentivize your hourly employees to think and work like owners by making yours a “great place to work.”

Tommy Eden is a partner working out of the Constangy, Brooks, 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.