On March 14, 2016 the U.S. Department of Labor submitted its proposed overtime rule to the Office of Management and Budget (OMB) for final review. The OMB is expected to publish the final rule over the next 90 days, after which employers likely will have at least 60 days to come into compliance. Given this timeline, employers should expect a compliance deadline sometime this summer, likely in July or August.
Once the final rule takes effect, it will more than double the minimum salary threshold for white-collar exempt employees, from $455/week to $970/week. If the terms are consistent with the proposed rule, the final rule is expected to:
Increase the annual salary for white-collar exempt employees, from $23,660 to $50,440;
Raise the annual salary for highly compensated employees from $100,000 to $122,148; and
Annually adjust the minimum salary threshold for exempt employees to account for inflation.
Employers who have not yet created or implemented a strategy to address these anticipated changes should begin to do so. In crafting a plan, employers may want to consider the following:
Identification of positions currently classified as exempt with annual salaries below the new anticipated thresholds.
Creation of a strategy for employees who may be impacted, with the understanding that the strategies may differ based on categories or positions of employees. In this regard, employers will need to evaluate whether to increase the employee’s pay to the new minimum salary threshold to maintain the exemption or change the employee’s status to non-exempt and pay the employee at an hourly pay rate based on tracked hours worked. Alternative or complementary strategies may exist, so employers should consult with their attorneys.
Modification of existing compensation structures to account for salary increases for employees in different salary grades to avoid pay compression.
Adoption of a mechanism or a plan to ensure future salary increases for affected positions in the event thresholds are adjusted annually to account for inflation.
Implementation of a plan to communicate with and train affected employees and their managers on the upcoming changes.
For further guidance on how the upcoming changes may impact your workplace, or for assistance in formulating or implementing a plan for handling these changes, please contact your Kutak Rock LLP attorney or a member of our employment group listed in the right-hand column.