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Proposed Changes to Exemption Rules


On July 6, 2015, the U.S. Department of Labor posted its long anticipated proposed amendments to the minimum wage and overtime exemption tests for executive, administrative and professional employees under the Fair Labor Standards Act. 

Under the proposed amendments, the required weekly salary to be paid to executive, administrative and professional employees would increase from $455 per week to $970 per week. On an annualized basis, this change would increase the required salary from $23,660 to $50,440 per year. 

In addition, the proposed revisions would increase the annual salary threshold for employees to satisfy the highly compensated employee exemption test under the Fair Labor Standards Act from $100,000 to $122,148. 

Pursuant to the proposed amendments, the compensation figures would not be fixed. The proposed amendments would establish a mechanism for automatically updating the salary threshold annually to ensure that the required salary level for executive, administrative and professional exempt employees is equal to the 40th percentile of earnings for full-time salaried workers nationally and the salary for highly compensated employees is equal to the 90th percentile of earnings for full-time salaried workers. 

The amendments to the Fair Labor Standards Act have not been finalized and may differ in some respects to the proposal set forth by the U.S. Department of Labor. However, employers should expect significant increases in the threshold salary levels. It is anticipated that the proposed changes will be finalized in mid-2016. As such, employers have time to begin planning for the changes and the effects of those changes.