James B. Sherman

What do you get when the U.S. Department of Labor abruptly more than doubles the minimum salary employees must be paid in order to qualify as exempt from the overtime requirements of the Fair Labor Standards Act (FLSA)? For starters, you impact many millions of employees (an estimated 4-5 million). Employers are faced with the dilemma of choosing either to: (1) increase salaries of affected employees to the new minimum - increases of up to 100% in some cases - in order to keep them exempt from overtime; or (2) reclassify workers from exempt to non-exempt status, thus making them eligible for overtime pay. So what's the big deal? The Obama administration claims the final rule, which takes effect on December 1, 2016, will result in big pay hikes for millions of employees whose salaries currently fall below the new $47,476 annualized minimum exempt salary level.  The administration's theory is that employees will receive a DOL imposed salary hike, or lots of extra pay in the form of overtime pay at the FLSA required rate of 1½ times the regular rate for all hours worked over 40 hours in a workweek. To be sure, employers who fail to assess the impact of the sweeping changes under the DOL's new rule, will likely see huge spikes in payroll costs before the year is out; that, or lawsuits from plaintiff wage and hour lawyers who are just licking their chops at the many prospects for claims against unsuspecting employers. The potential impact to the bottom line may be enough to put some employers out of business. Particularly hard hit are retail, hospitality, healthcare and non-profit organizations, although employers in manufacturing, transportation, food and many other industries will no doubt be affected as well.  Wessels Sherman aims to help employers deal with these changes.