DOL Preparing to Increase Salary Threshold for "White Collar" Exemptions

Starting in 2016, salaried employees making less than $50,440 a year will no longer be exempt from overtime.

Providers should take steps now to plan for this drastic change to the overtime laws.

The Department of Labor (DOL) is expected to implement a new regulation in 2016 that will have a significant effect on employers across the country – and skilled nursing facilities in particular. Under the new rule, salaried employees making less than $970 per week ($50,440 per year) will no longer be exempt from overtime under the “white-collar” exemptions. This change will more than double the current salary threshold of $455 per week ($23,660 per year), and will apply to employees who are working in executive, administrative, professional, computer and outside sales capacities, even if they otherwise satisfy the long-established “duties tests” for the white collar exemptions. This could affect various categories of employees in the long term care profession, including management staff, RNs and others who earn less than the $50,440 annual minimum. Impacted employees will be entitled to overtime pay when they work over 40 hours in a week.

Clearly, the ranks of non-exempt employees will grow and employers will need to be increasingly vigilant to ensure that they properly classify their employees and pay them appropriately.

Here are steps that employers should begin taking now to prepare:

Identify employees who are likely to be affected by this change. You should look for employees who are treated as exempt, but earn between $23,660 and $50,440 per year. These employees will be non-exempt under the new regulation.

Determine whether any of the employees you identify ever work in excess of 40 hours per week. If so, understand that under the new rule these employees will be entitled to receive overtime compensation for these hours.

Develop a plan for how to deal with the changes. Will you continue business as usual and simply pay overtime if and when it is incurred? Will you hire additional staff to reduce overtime? Will you structure their job duties differently so as to avoid potential overtime? Will you increase some employees’ salary to ensure that they remain exempt? (Remember, in addition to meeting the threshold salary, employees will still need to meet the “duties” test for the white collar exemptions.)

Make sure you consider what effect, if any, changing employees from exempt to non-exempt will have on their eligibility for benefits.

Please contact Rob Pivonka (Pivonka@ROLFLaw.com) or Chris Kuhn (Kuhn@ROLFLaw.com) at 866.495.5608 if you would like further information or if you have any questions regarding this alert.

Please note that this alert is intended to be informational only, and is not intended to be nor should it be relied upon as legal advice. Rolf Goffman Martin Lang LLP will not be responsible for any actions taken or arrangements structured based upon this alert. The receipt of this alert by an organization that is not a current client of Rolf Goffman Martin Lang LLP does not create an attorney-client relationship between the recipient and the law firm.