Local Business

Stewart: Overtime changes loom in 2016

In summer 2015, the Department of Labor (DOL) proposed changes to the Fair Labor Standards Act (FLSA) concerning overtime exemption regulations.

Specifically, the DOL proposed to double the minimum salary requirement that would exempt executive, administrative and professional employees from overtime pay.

The proposal means the current minimum salary requirement of $455 of earnings a week ($23,660 annually) would increase to $970 per week ($50,440 annually).

The proposed changes to the minimum salary requirements also contemplate automatically updating the minimum salary requirement each year based upon a certain percentile (40 percent) of earnings for all full-time salaried workers.

Another proposed change to “highly compensated employees” would increase the exemption status from $100,000 to $122,148, with annual adjustments thereafter.

The obvious effect of the proposed changes is the likelihood of more employees, despite being salaried, being eligible for overtime pay. As a result, employers will need to be cognizant of the exempt earnings amount on a continuing annual basis (as it would be adjusted each year) for their salaried employees to ensure they do not run afoul of the FLSA regulations.

At the present time, there is no specific timetable for when or if these rules will go into effect. Based upon comments by Solicitor of Labor Patricia Smith, the Wall Street Journal has speculated final regulations would not be issued until late 2016.

Employers should monitor the proposed changes and minimally evaluate their employees who fit into exempt classification and earning less than $50,400 annually. Employers should consider evaluating compensated employees earning less than $122,148.

Employers also have several possible options to address the increased salary requirements. Businesses and organizations can evaluate tasks and duties to ensure such employees do not trigger overtime.

They can consider reassignment of tasks to other employees and possibly increase pay for employees who would otherwise fall below the minimum pay threshold to keep them properly in exempt status.

Another item of note for employers is the Illinois Department of Labor guidelines effective since 2014 that require hours of all employees – exempt and non exempt – to be recorded and retained for at least three years.

Undoubtedly, this requirement for employees classified as exempt promotes the ability for employees who question their exempt status to document any claim for unpaid overtime wages.

• Brad Stewart is an attorney with Zukowski, Rogers, Flood & McArdle in Crystal Lake. Stewart mainly practices corporate and local government law. He can be reached at bstewart@zrfmlaw.com.

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