The new salary minimum for the so-called white collar exemptions for certain executive, administrative, and professional employees may soon take effect, according to the Department of Labor (DOL). Solicitor of Labor, M. Patricia Smith, was on record at a recent American Bar Association Fair Labor Standards Legislation Committee meeting that the DOL anticipates publishing the final amendments to the white-collar regulations by late spring or summer of 2016. The DOL is apparently committed to making the amendments effective before the end of the year.
Under the current regulations, a white collar employee must be paid only $455 per week (equivalent to $23,660 annually) to meet the salary amount test for an exempt executive, administrative, or professional employee. In addition to the salary amount test, the salary basis test and duties tests must be met to satisfy the white collar exemptions.
The anticipated change to the salary amount test will more than double the minimum threshold, to the 40th percentile of weekly earnings for full-time salaried workers. This would raise the salary threshold from its current level of $455 a week (the equivalent of $23,660 a year) to about $970 a week ($50,440 a year), based upon 2016 data. The DOL is also considering an alternative proposal to link the salary increase to the Consumer Price Index (Urban index). Under either standard, the minimum salary threshold would vary from year to year, and likely increase over time.
Needless to say, this is a big change. Businesses trying to budget for an upcoming fiscal year will need to take into account this ready-to-be enacted regulation. This anticipated regulatory change will likely impact payroll budgets and general operations planning for employees who will not be in line for a pay raise to keep their exempt status. This regulation could also impact salary budgeting if employers change pay scales to maintain exempt status.