DOL Announces Proposed Changes to FLSA Exemption Rules

June, 2015


By Ryan Orr, JD, HR and Compliance Consultant
Cascade Employers Association
[email protected]

On June 30, 2015, the Department of Labor announced its proposed changes to the FLSA rules that determine when an employee is exempt from wage and hour laws. Here is a summary of these proposed changes:

  • Increase the salary threshold from $455 per week ($23,660 per year) to $970 per week ($50,440). The new salary threshold is based on the 40th percentile of full-time employee income. Note that the proposed threshold could change because it is based on what the DOL currently expects the 40th percentile to be in 2016.

  • Allow employers to include non-discretionary bonuses and other non-discretionary incentive income in an employee’s total compensation calculation.

  • Increase the salary threshold for highly compensated employees from $100,000 per year to $122,148 per year based on the 90th percentile of full-time employee income.

  • Create an indexing system that will provide for annual updates to the salary threshold without the need for additional rulemaking. The DOL is currently considering two methods for indexing the salary threshold. The first would tie the salary thresholds to the 40th and 90th percentiles for full-time employee income. The second would provide for increases based on rises in the consumer price index.

  • The DOL made no proposed changes to the duties test for exemptions. However, it left open the possibility of making changes to the duties test before the final rules are issued.

Keep in mind that these are not the final rules. The rules are currently open to comment, and they may change between now and implementation. Currently, the rules are expected to be in place by 2016. Cascade will keep you updated on further developments as they become known.

For questions about how these proposed rules may affect your organization’s pay practices, contact Cascade today.

 

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