Right before the Labor Day holiday, the DOL proposed expensive new overtime regulations that are expected to raise the salary level for exempt employees high enough to blow any labor budget. In addition, the proposed regs call for an automatic increase in the salary level for exempt administrative, executive, professional and highly compensated employees every three years. Those increases would not require the DOL to draft and issue proposed regulations for comment before implementation.
The Fair Labor Standards Act (FLSA) has been around for nearly a century. It provides for a federal minimum wage plus sets rules for which workers are entitled to overtime, among other rules. The law and its regulations are an established part of the HR landscape. If the proposed regulations kick in, the salary required for most exempt classifications will rise to $1,059 per week, or $55,068 per year. Highly compensated employees would see their annual pay increase to a whopping $143,988.
In addition, the DOL also says that the salary figures may go significantly higher before the final rule comes out — and that the current figures are essentially place holders. Employers must make choices now in anticipation of final regulations. Will you raise salaries to the new proposed level — whatever that level may end up being — and plan for automatic increases every three years or will you reclassify some as hourly employees, making them eligible for overtime?
Don’t expect much help from the Supreme Court either. It recently ruled that a very well-paid oil industry worker was paid a handsome daily rate instead of a weekly regular salary. According to the Supreme Court, that was a big mistake. Because he wasn’t paid on “a salary basis,” he didn’t qualify as exempt. His employer owes him overtime at $2,011.50 per hour!