On March 14, 2016, the Department of Labor forwarded its modifications to the Notice of Proposed Rulemaking (NPRM), which increases the salary requirements for exempt workers under the Fair Labor Standards Act (FLSA), to the Congressional Office of Management and Budget (OMB).  This is the last step before the NPRM’s publication.  [See here]

As we previously reported [See here],  the NPRM increases the minimum salary requirement for exempt workers from $455 per week to $970 per week.  The proposed salary minimum for highly compensated workers was raised from $100,000 to $122,148.  The NPRM also proposes two mechanisms for the minimum salary requirements to be updated automatically, rather than the DOL being required to promulgate a regulation every time it wants to change the minimums.

Employers were given 60 days to comment on the proposed changes and nearly 200,000 comments were posted about the rule change!  Many employers commented that they would not be opposed to an increase in the minimum salary requirement for exempt workers, but that doubling the minimum was unreasonable.

It is unknown at this time what modifications to the NPRM were made by the DOL prior to submission to the OMB.  After the OMB’s review, Congress will have 60 days to hold hearings on the impact of the regulation before the rule’s effective date (and the effective date will likely be 60 days after publication).  Based on this timeframe, it is possible to see the final rule sometime this Summer, with an effective date of sometime in Fall.  [See here]

The Solicitor of Labor commented recently at a Federal Labor Standards Legislation Committee conference that she suspected that the rule would be published by late Spring or Summer of 2016, making the rule effective before the end of the year.  [See here]

The Solicitor of Labor also stated at the same conference that the DOL has been reviewing whether the Administrative Procedure Act would allow revisions to the duties tests for white collar workers without releasing a proposed rule on same.  In the NPRM, the DOL solicited comments about the duties tests, but did not make any changes to the tests.  The DOL solicited comments on the following regarding the duties tests:

1. What, if any, changes should be made to the duties tests?
2. Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?
3. Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?
4. Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the Department reconsider our decision to eliminate the long/short duties tests structure?
5. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work?”

(See NPRM).  If we can glean anything from these requests for comments, it appears the DOL would like to implement a percentage of time test to determine if a worker is truly performing exempt duties as his/her primary duties.

Employers should be on the lookout for the release of the final rule and, because the release date will be a mere 60 days from the effective date, should plan ahead for the changes now.  Here are some ways to prepare for the NPRM’s publication.

1. Identify exempt employees whose salaries will fall below the new minimum.
2. Decide whether to increase those workers’ salaries to maintain the exemption or convert them to nonexempt status.
3. If an employee is converted to nonexempt status, implement changes attendant to the employee’s new status, such as keeping time records (newly nonexempt employees may need training on writing down all compensable time), providing lunch and rest breaks, and paying overtime.
4. Review and update off-the-clock work policies. Consider implementing a policy regarding afterhours use of mobile devices for work-related purposes.
5. Review and update overtime policies. Consider including language encouraging employees to promptly report any error in overtime pay calculations.
6. Evaluate and update time tracking systems.
7. Establish a procedure to keep track of the new minimum salary level as it increases every year.
8. Consider employing legal counsel to conduct a wage and hour audit.
9. Budget for the upcoming changes now.