By MeLissa Crockett
The Department of Labor (DOL) has submitted proposed changes to the current exemption salary threshold of $23,660 to the Office of Management and Budget (OMB) for its final review and approval to increase the threshold to $50,440. The salary level for highly compensated employees currently at $100,000 would increase to $122,148 per year. If approved, this revision is expected to affect millions of employees who are currently classified as exempt from overtime. The proposed changes are anticipated to move quickly through the OMB’s approval process and could take effect as early as July 2016 requiring a 60 or 90 day implementation period by employers.
Employers are encouraged to begin reviewing their current salary-exempt employees and identify those whose salary falls below the $50,440 threshold. Here are some tips to help during the review process:
- Determine how many hours per week the current salary-exempt employees are working. If these individuals work more than 40 hours per week, decide whether their job requires more than 40 hours per week, or if the hours can be reduced to 40 or less to avoid the increase.
- If the job performed requires more than 40 hours per week on a regular basis, employers will need to decide whether to increase the salary to the required $50,440 or convert the position to a non-exempt pay plan and pay the employees overtime for hours worked in excess of 40 hours per week with an hourly rate at time and one-half.
Employers are also encouraged to review how each employee is classified, exempt vs. non-exempt. Currently, no changes have been proposed on the Duties Test (test for determining exempt or non-exempt status). However, there are discussions on whether the test should require employers to track time to ensure that exempt employees spend a certain percentage of their time performing exempt duties. In order for an employee to be classified as exempt, their primary job description, not job title, must meet specific criteria. Listed below are the current criteria per level under the Duties Test; note, all must be paid on a salary basis at a rate not less than the minimum exempt amount.
Executive Employees
- must have as their primary duty managing the company or managing a recognized department or subdivision of the company, generally responsible for the success or failure of business operations under their management
- must customarily and regularly direct the work of at least two other full-time equivalent employees
- must have the authority to hire or fire other employees, or to make suggestions and recommendations that are given particular weight as to the hiring, firing, advancement, promotion, or any other change in status of other employees
Administrative Employees
- must have as their primary duty the performance of office or non-manual work directly related to management or general business operations of the employer or the employer’s customers
- primary duty must include the exercise of discretion and independent judgment with respect to matters of significance
Learned Professional Employees
- primary duty is the performance of work requiring knowledge of an advanced type including the consistent exercise of discretion and judgement in a field of science or learning where the advanced knowledge is acquired by a prolonged course of specialized intellectual instruction. Examples include, doctors, teachers, lawyers, etc.
Creative Professional Employees
- primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor (musicians, actors, etc.)
Computer Employees
- must be paid on either a salary or fee basis at a rate not less than the minimum exempt amount
- must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field
- must have as their primary duty work consisting of:
- the application of systems analysis techniques and procedures
- the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs
- the design, documentation, testing creation, or modification of programs related to machine operating systems
- a combination of these duties that requires the same level of skills
Outside Sales Employees
- must have as their primary duty either making sales or obtaining orders or contract for services or for the use of facilities; and
- must customarily and regularly work away from the employer’s place of business (at customer sites, not home office)
Highly Compensated Employees
- must perform office or non-manual work
- must be paid total annual compensation of $100,000, currently, proposed to increase to $122,148
- must customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee (does not apply to outside sales employees)
Others
- Other workers that would be excluded from minimum wage and overtime requirement include: employees of certain seasonal businesses, including camps, amusement or recreational facilities, and nonprofit educational conference centers.
The final ruling on the proposed overtime changes could take several months or a few weeks and if passed will be published in the Federal Register and effective within 60 days of its publication. We advise you to consult with your labor attorney on specific classifications of your employees.