On May 18, 2016, the Department of Labor published updated Fair
Labor Standards Act ("FLSA") regulations which go into
effect on December 1, 2016. While the new regulations do not amend
or alter the duties tests associated with exemption (from overtime)
status (i.e. professional, administrative, executive requirements
etc.), the minimum salary basis requirement for exemption will
increase from $455 to $913 per week or $23,660 to $47,476 annually
for a full-year worker. Similarly, the requirement for Highly
Compensated Employees' salary will increase from $100,000
annually to $134,004 (the annual equivalent of the 90th percentile
of full-time salaried workers). The regulations also provide for
automatic updating of compensation levels every three years and are
expected to impact nearly 4 million workers. Failure to effectuate
these changes will result in liability for unpaid overtime, as well
as treble damages.
So what does this mean for you? Now is a good time for employers
to take an immediate audit of those employees currently classified
as exempt from overtime requirements by reviewing job descriptions,
actual responsibilities performed, and current salary level to
ensure proper classification. Employers must then determine whether
a properly-classified exempt employee's salary needs to be
increased to meet the minimum requirements of the new regulation,
or if the employer will elect to convert the employee to non-exempt
Whatever the decision, employers should begin necessary
preparations, including advising employees in writing of their
revised salary or any change in their exemption status and being
prepared to answer questions of employees who may be confused (or
unhappy) about being reclassified.
If you have not begun to consider how this new regulation will
affect your employees, please contact Brooke A. Schneider of our
employment team or your Withers attorney to discuss implementation
and what you need to do to comply before the new regulation goes
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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