Start planning now for new overtime rules expected July 2016

Employers should begin preparations for the likely announcement of new overtime regulations. The U.S. Department of Labor has announced that it anticipates publishing final versions of new overtime rules in July of 2016. The updated rules are expected to affect up to an estimated 4.6 million workers currently classified as exempt salaried employees.

In July 2015 the DOL issued notice of its proposed changes to the Fair Labor Standards Act (FLSA). The DOL’s major proposed change is to dramatically increase the minimum compensation for employees that are classified as exempt under the executive, administrative, and professional exemptions. The DOL is seeking to raise the salary test from $23,660 per year, or $455 per week, to approximately $50,440 per year, or $970 per week, and recommends tying the salary test to a consumer index for automatic yearly increases. The proposed rule also includes an increase in the salary for the highly compensated employee exemption to apply, from its current level of $100,000 per year to $122,000 per year. The DOL received 290,000 comments on the proposed changes to the overtime regulations. The comment period closed in September.

The DOL has now announced July 2016 as the anticipated date to publish the final rules. The date is the government’s best estimate for when it will release final regulations, so the date of the final rule may change. However, now is the time for employers to prepare for the anticipated changes, including notifying senior leadership that potentially significant changes are expected to the FLSA overtime rules in the next year. Employers should educate themselves on these exemptions, consider how these changes will impact their organization, and begin to develop an implementation plan.