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Awaiting the Unknown: New exemption rules not expected until July 2016

In June 2015, the Department of Labor (DOL) announced proposed changes to overtime regulations that would significantly increase the minimum salary required to classify an employee as an exempt executive, administrative, or professional employee, and proposed indexing those wages to the Bureau of Labor and Statistics data on annual earnings in future years. Those proposed regulations would increase the minimum weekly salary to the 40th percentile of weekly earnings for full-time salaried workers, which in 2016 the DOL projects will be $970 per week, or $50,440 per year. For highly compensated employees, the threshold would increase to the 90th percentile, or $122,148 annually.  

The DOL requested comments on the proposed regulatory amendments, including soliciting comments on whether the DOL should amend the duties test for the white collar exemptions. The public responded with over 264,000 comments. Likely as a result of the significant public response, the DOL now has announced that it does not anticipate releasing any final rules until July 2016 at the earliest. Solicitor of Labor Patricia Smith also recently indicated that the final rules may include changes to other regulations, including the duties test, even though no such changes were identified in the June 2015 Notice of Proposed Rulemaking. 

This delay could have important consequences for employers anxiously awaiting the final rules. If the final rules are issued in “late 2016,” employers may only be given a few months to implement any necessary changes. At this point, nothing about the final rules are known for certain. However, employers should anticipate that the minimum salary level will increase to at least $970 per week, and start their compliance planning now. Any compliance plan should include a determination of which employees, if any, should be re-classified as non-exempt, and which employees will remain exempt. Employers may also need to consider whether workforce adjustments, restructuring of positions, or possible outsourcing of certain functions may be required to comply with the new rules within existing salary budgets. 

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