President Barack Obama stated last year that one of his top priorities was to address what he described as “stagnant wages.” He indicated that the white collar exemption “has not kept up with our modern economy” and that, “because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.” The white collar exemption includes the executive, administrative, professional, and outside sales employees.
The President and Secretary of Labor, Thomas Perez has given orders to the Department of Labor to change the current white collar exemption under the FLSA to try and increase the number of people entitled to overtime wages.
3 Changes You Should Know Under the FLSA White Collar Exemption:
- Try and seek an increase to the current minimum salary requirement. Last month The Economic Policy Institute has recommended to the DOL that the 2015 salary exemption be raised to $970 per week, or $50,440 per year. The current exemption is $455 per week or $23,660 per year.
- Look at the salary basis test to include a requirement that the salary be large enough to ensure that the employee’s salary provides at least minimum wage for all hours worked in a workweek (accounting for the fact that they work more than 40 hours in a week).
- Look at the primary duties portion of the white collar exemptions, especially the executive exemption that applies to managers and supervisors and ensure that 50% of their responsibilities are actually exempt responsibilities.
Deadline to Implement the White Collar Exemption
In November 2014, the DOL set the end of Q1 2015 as the deadline to implement the changes to the white collar exemption. So what does this mean? It means that these changes will most likely happen, and it’s a good idea to start to prepare for them now.
- Determine whether you have current job descriptions that correctly reflect job duties and convey the essential functions and duties of each role, most importantly for exempt positions.
- Identify, any positions that are currently exempt positions that may be at risk of becoming non-exempt with the change of classification. This may include positions which are not performing enough exempt level tasks or which may not have a high enough salary.
- Begin to make budget plans for how to react if the minimum salary increases. Companies will need to look at headcount as they might need to have a reduction in workforce if the increase in wage is that significant.
As the HR leaders for our clients, we are responsible for executing the necessary steps to make sure the employees are properly classified and paid correctly. Helios helps organizations identify and mitigate their risk before it’s too late by conducting compliance assessments. If your company is subject to an audit by the DOL’s Wage and Hour Division and the audit reveals classification mistakes (an exempt employee should be non-exempt for example) it could be extremely costly to an organization if back pay (missed overtime) was to be awarded. Here’s another article on “How Misclassifying Employees Can Cost your Business“.