How will the recently proposed Fair Labor Standards Act (FLSA) regulations affect your organization? On June 30, 2015 the Wage & Hour Division (WHD) of the Department of Labor (DOL) released their proposal to change the FLSA standards for exempt employees. The new regulations will raise the minimum salary requirements for exempt employees, extending protection to millions of Americans that aren't covered by overtime pay.
The proposed regulations will impact employees working overtime hours who aren't being justly compensated for their time. "A convenience store manager, fast food assistant manager, or some office workers may be expected to work 50 or 60 hours a week or more, making less than the poverty level for a family of four, and not receive a dime of overtime pay," according to the DOL. Current FLSA regulations are outdated due to inflation. The current minimum salary requirement for exempt employees is $23,660 per year. The proposed salary requirement would jump to over $50K per year, a significant increase. The DOL's goal is to protect employees by making sure they're making a fair wage.
The DOL's June 30th proposed regulations will:
- Raise the threshold under which most salaried workers are guaranteed overtime to equal the 40th percentile of weekly earnings for full-time salaried workers. As proposed, this would raise the salary threshold from $455 a week ($23,660 a year) – below the poverty threshold for a family of four – to a projected level of $970 a week ($50,440 a year) in 2016.
- Extend overtime pay and the minimum wage to nearly 5 million workers within the first year of its implementation, of which 56 percent are women and 53 percent have at least a college degree.
- Provide greater clarity for millions more workers so they – and their employers – can determine more easily if they should be receiving overtime pay.
- Prevent a future erosion of overtime and ensure greater predictability by automatically updating the salary threshold based on inflation or wage growth over time.
What Do New FLSA Regulations Mean for Employers?
Although nothing is changing today, when the change is effected, employers across all sectors will feel the impact to their bottom line. Employers should start thinking about how these changes will affect them financially and operationally. "The WHD estimates that 10.9 million workers will no longer qualify as exempt based on the new salary level. Other estimates peg this number at 15 million or more," Franczek Radelet P.C. points out. It is important to start reviewing and budgeting for these salary increases which could roll out in 2016.
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