New York Employment Law Blog

Wednesday, July 8, 2015

White Collar Salary Test More Than Doubled For Exemption

On June 30, 2015, the United States Department of Labor’s Wage and Hour Division (the “DOL”) released its anticipated proposed changes to the “white collar” exemptions under the Fair Labor Standards Act – being the executive, administrative, professional and highly-compensated employee exemptions.

In sum, the DOL’s proposal seeks to more than double the salary that white collar employees must receive in order to be exempt, from $455 per week (or $23,660 per year) to about $970 per week (or $50,440 per year) in 2016.  The DOL finds that this increase “at the 40th percentile of weekly earnings for full-time salaried workers represents the most appropriate line of demarcation between exempt and nonexempt employees.”  In addition, the DOL proposal seeks to establish a mechanism for automatically updating the salary levels on a going forward basis (such as using a consumer price index or fixed percentile of wages).  Lastly, the proposal increases the salary for highly compensated employees from $100,000 to about $122,000 in 2016.

Notably, the proposed changes would not affect the current duties test for the exemptions, although the DOL is seeking comments to the proposal, which are due by September 4, 2015.  Accordingly, there still can be changes to the job duties requirements for each of the exemptions. 

What’s the fallout?  The salary threshold in the past has been somewhat easy to meet for many employers, and litigation on exemption issues tended to focus on the duties test.  With the implementation of the new rule, for those who fall below the new salary threshold, employers are going to have to decide whether they want to convert those employees to hourly or increase their salaries to keep up with the minimums.      

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