On June 30, 2015, the Department of Labor (DOL) released a notice of proposed rulemaking updating the Fair Labor Standards Act (FLSA). This means that more employees will be eligible for overtime pay.
Particularly, the new revision to the FLSA amends the so-called "white collar" exemptions, which cover executive, administrative and professionals. Nonetheless, the new exemptions do not extend, at least for now, to outside sales employees, lawyers, teachers, and doctors.
For employees to fall within the white collar exemptions, they must perform executive, administrative or professional duties and make a certain weekly salary. With this proposal the DOL intends to increase the salary level threshold from $455 per week (or $23,600 work-year) to $970 (or $50,440). The Department has estimated that for 2016, this increase will represent the 40th percentile of weekly earnings for full-time employees.
Likewise, the DOL has proposed a raise in the salary level for highly compensated employees from $100,000 to $122,000, which is the total annual compensation a worker would need to make to be exempted from overtime payment.
These changes reflect that for the first time, the salary and compensation levels would be indexed to the Bureau of Labor Statistics (BLS) data, which will also include an annual update that won't require further rulemaking.
The Fair Labor Standards Act guarantees a minimum wage and overtime pay at a rate of not less than one and one-half times the employee's regular rate for hours worked over 40 in a workweek. These new overtime exemptions will immediately entitle approximately five million additional workers to overtime pay.
According to the Department of Labor of Puerto Rico, this proposed rule, if adopted, will likely affect 80% to 85% of Puerto Rican employers in the way they pay their exempt employees.
Because these are proposed rules, the Department is inviting the public to submit their comments on the salary level proposal and other issues. For example, the Department of Labor is considering whether to permit non-discretionary bonuses and incentive payments to count for purposes of determining the standard salary level test for the white collar exemptions.
These new changes will not be released until mid-2016. However, many employers will have to start planning their budget for salary and overtime increases for next year. Goldman Antonetti & Córdova, LLC remains committed in assisting you and your business to adjust to changes in the law. If you need further assistance in this area, please contact: