Department of Labor Fair Labor Standards Act (FLSA) Overtime Rules in Final Stages of Review

On March 14, the U.S. Department of Labor sent its proposed Fair Labor Standards Act overtime rules to the U.S. Office of Management and Budget for review. OMB review is the last step before final rules are published and implemented, and we have learned today that the final rules will be most likely be published sometime in mid-May, with an effective date 30 to 60 days thereafter.
Therefore, you should prepare now for the rules’ financial and possible other ramifications.

Although the specifics of the final rules are unknown, the rules almost certainly will increase the “white collar” overtime exemptions’ current annual salary threshold of $23,660—perhaps to the proposed rules’ threshold of $50,440 per year, or $970 per week. This means that employees who meet the duties tests under the professional, executive, or administrative exemptions but do not earn the new requisite salary will be nonexempt and entitled to overtime.

We are sending you this information now so that you may begin to consider how your firm will address the final rules and their effects.

Such considerations might include:

Identifying all potentially affected employees and determining how many hours they currently work per week
Determining whether to continue to pay affected employees on a salaried basis and raise their salary to comply with the new rules or convert them to hourly employees and be subject to paying overtime
Tracking newly nonexempt employees’ work hours, including work before or after regular hours, on weekends, and conducted from home
Determining whether to adjust employee wages, commissions, bonuses, and benefits—and whether, for perceived equity or other reasons, to also adjust others’ compensation and benefits
Assessing work performed on a day-to-day basis by affected employees and whether their duties can or should be modified
Determining how the decision to reclassify affected employees will be communicated to employees
Determining how to address morale and other non-monetary effects of reclassifying employees who consider themselves to be management-level workers
Analyzing and correcting any current FLSA misclassifications

We will notify you once final rules are published, and we will monitor and send out additional information of the FLSA changes and their effects. We have just completed a meeting in Washington reviewing the ramifications of this Rule change and wanted to provide this information immediately so that our client firms can begin their planning and budgeting processes now—perhaps using several different salary thresholds between $40,000 and $50,440, since the final salary level is not yet known—so you are prepared when the final rules take effect.