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HR Corner
Posted 12/7/2015
Author Carrie B. Cherveny
 
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For the first time in almost 11 years, the Department of Labor (DOL) has issued significant proposed changes to the Fair Labor Standards Act (FLSA). To understand the changes, we must first look at the FLSA as it stands today. The FLSA was enacted in 1938 and, among other things it:

• established a minimum hourly wage for nonexempt employees;

• created a minimum weekly salary for exempt employees;

• created time and ½ overtime for all hours in excess of 40 in a workweek for nonexempt employees; and

• established the criteria for exempt employees (i.e. those who would not be required to be paid overtime for hours worked in excess of 40 hours).

In March of 2014, President Obama asked the DOL to “modernize” the FLSA including reviewing the weekly salary and the criteria used to determine whether an employee is “exempt” or “non-exempt” (referred to as the “duties test”).

Weekly Salary

The last time the DOL addressed the minimum salary was in 2004 when it changed the weekly minimum salary from $250 to $455. Today’s weekly salary of $455 is below the poverty line for a family of 4.

The DOL has proposed a new minimum salary equal to the 40th percentile of earnings for a full-time, salaried employees. The latest data available for the first quarter of 2015 indicates that the 40th percentile of the salaries earned by full-time employees is $951 per week or $49,452 each year. The DOL expects a 2% growth between the first quarter of 2015 and first quarter of 2016 and projects that the final weekly salary amount will be $970 or $50,440 annually. Additionally, for the first time the DOL is proposing a methodology to automatically update the weekly salary amount.

The Duties Test

The DOL believes that exempt/management employees perform nonexempt duties as more than 50% of their job but are classified as exempt because the exempt duties are so important that they should be considered the employee’s primary duties. DOL is considering a number of options to revise the current Duties Test. It may require that exempt employees spend at least 50% of their time performing exempt duties. Or, the DOL may limit the amount of nonexempt work an exempt employee may perform or some combination of the two. Although DOL has not articulated specific changes to the Duties Tests in the proposed rule, it has left open the possibility that it may incorporate revisions in the final rule.

What Happens Next?

The DOL intends to rely on the data from the first quarter of 2016 and has recently announced that we can expect to see the final rule sometime near the end of the 2016. Because the rule will take effect before the next President assumes the office, employers should be prepared for a very short window between the announcement of the final rule and the effective date of those changes. There are a number of steps that employers may take now to be prepared. We review those steps in our recorded FLSA webinar and recommend that our members review that webinar to consider their next steps.

About the author

Carrie B. Cherveny, Esq., Vice President of Employment Practices, joined AlphaStaff in July 2012. In this role, Ms. Cherveny oversees the general counsel’s office, EPLI management and HR services and is involved in business development. Prior to joining AlphaStaff, Ms. Cherveny had over 15 years of experience as an employment attorney and as a human resources professional serving as a partner at Schwarzberg & Associates. Ms. Cherveny is a frequent speaker at events held by the Florida State chapter and local chapters of the Society of Human Resources Management (SHRM) and held the position of Florida State Director of Federal Legislative Affairs for the Florida chapter of Society of Human Resource Management (SHRM).

Ms. Cherveny earned her Juris Doctor from Stetson College of Law and a masters and bachelor’s in communications from University of South Florida. She is also a member of Society for Human Resource Management.

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