January 08, 2016 Articles

What the DOL's Proposed Changes to the White-Collar Exemption Rule May Mean for Employers

The proposed changes may cost employers billions of dollars.

By Sonya Kwon and Jeremy Guinta – January 8, 2016

On July 6, 2015, the Department of Labor (DOL) proposed a rule that will more than double the minimum salary necessary for a worker to be classified as “exempt” under the white-collar exemption provision of the Fair Labor Standards Act (FLSA). The proposed changes will affect the minimum salaries individuals must make to be exempt from overtime, and they have the potential to cost employers billions of dollars.

Food service and hospitality are the likely industries to feel the greatest impact from the proposed rule change. Median salaries for servers and food service mangers are currently below the proposed threshold. Preschool education administrators and directors could also be affected.

If the current proposed rule is adopted and the salary threshold for the white-collar exemption increases, many employees could gain nonexempt status. Employers should revisit current employee duties and salary levels and determine which employees should be classified as exempt. It is important to be aware that the annual salary threshold may increase from year to year based on the DOL’s methodology, which could lead to employees’ salaries rising or the disqualification of employees from exempt status.

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