Labor & Employment
Action Item: On March 14, 2016, the U.S. Department of Labor (“DOL”) took the final step in its long process to put in place the final new regulations governing the Fair Labor Standards Act’s “white collar exemptions.” DOL has submitted its final draft, which is top secret, to the Office of Management and Budget (“OMB”) for its review. Employers must start preparing now—once completed, the final regulations will be published and are expected to significantly increase the minimum salary for the exemptions (likely to more than $50,000 annually) and to require annual upward adjustments to that amount.
As we previously described here, on June 30, 2015, DOL issued its “proposed” new regulations to revise the white collar exemptions under the Fair Labor Standards Act (“FLSA”). The proposed regulations more than doubled the required minimum salary amount, while also stating an unprecedented intent to require that it be adjusted annually. DOL also dropped a significant “hint” that, in the final regulations, it may include changes to the exemptions’ duties tests (which would mean such changes would be implemented without a real opportunity for public comment). The proposed regulations generated nearly 300,000 public comments. Apparently, DOL has finished reviewing those comments and has revised the draft for final publication.
On March 14, 2016, DOL submitted its final draft of the new regulations to the OMB. The OMB’s review is the final step required for the regulation to be published and implemented. As a result, the final regulations are now imminent. Although OMB can take up to 90 days for its review, we expect that OMB will expedite its review, likely taking only 30 to 45 days. It seems clear that these new regulations will be effective before the end of the summer. Undoubtedly, DOL is moving at a pace to ensure that it avoids any potential challenges under the Congressional Review Act—which allows Congress a limited time period to override the regulations after they are published, subject to approval by the president (hence, the “mad dash” by DOL to put them in place well in advance of the inauguration of a new president).
None of the details of the final draft have leaked at this point. Much anxiety in the business community remains, given DOL’s prediction that the new regulations will impact more than five million workers. With the clock ticking on OMB’s 90 days, and an expected effective date that will be 60 days after publication, employers must start preparing now (if they have not already). First, identify which exempt positions fall in the salary target zone, which is likely between $23,660 (the current requirement) and $50,440 (the projected amount under the proposed regulations). Determine how to address those positions going forward, whether it be by reclassification or salary adjustment to the new minimum. Where reclassification is the only feasible option, pay restructuring will be an important element to consider. Of course, perhaps most importantly, employers should have a clear and strategic employee communications plan to accompany any changes made in the workplace.
