The Employer's Legal Resource: On the Horizon for 2016 -- Will Your Company Have to Raise Wages to Maintain Exemptions?

01.01.16

In our July 2015 ELR, we wrote about the Department of Labor's (DOL) proposed regulations which would require employees who qualify for most "white collar" exemptions to receive a minimum annual salary of at least $49,452 in 2015, a significant increase from the prior level of $23,660. Well, the DOL did not get its regulations finalized so, for now, nothing has changed.

Alas, the regulations are still in the works. So if you have not begun planning, this is your opportunity to do so. Although the DOL has not (and will not) give a precise date by which the regulations will be final, we expect they will be published sometime in the middle or latter part of 2016. Your action items for first and second quarter of 2015 should definitely include a review of exempt employees earning less than $50,440 annually (the floor for 2016). You should conduct an analysis of their position to determine if the exemption requires they satisfy the "salary basis test" -- most do. If so, you must either be prepared to raise their salary to the DOL's floor when the regulations become effective or be prepared to reclassify them to nonexempt. The former will require a fixed cost. The latter will require either incurring a potential unknown cost (the payment of overtime and possible costs associated therewith) or the cost of reallocating work to ensure no overtime is worked.

In either event, changes are coming. Develop a communication plan to help your employees understand why these changes are happening. Being prepared and rolling out a thoughtful plan will help ease any anxiety they might have. Remaining positive about the changes will also assist in a smooth transition.

By Kristen L. Brightmire, kbrightmire@dsda.com

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Rebecca D. Bullard

Rebecca D. Bullard

Rebecca represents clients primarily in labor and employment litigation and counsels clients regarding everyday employment matters. 

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