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Big Changes Coming to the FLSA

By now you know there are some big changes coming to the FLSA. You’re just waiting for the details. Well, they’re starting to leak out of Washington — and they’re not as heavy-handed as some feared.

In the weeks that followed President Obama’s executive order asking the DOL to amend the current FLSA overtime regulations — to make more workers OT-eligible — many businesses feared the minimum salary a worker would have to be paid to be OT-exempt would increase to $50,000 or higher.

That’s a far cry from the current minimum of $455 per week or $23,660 per year — and it had many employers, particularly small businesses worried their bottom lines would take big hit.

Now, however, it doesn’t appear as though the change will be quite that drastic — although it’ll still be quite large.
The Huffington Post is reporting that Ross Eisenbrey, vice president of the Economic Policy Institute, an organization that holds a lot of sway with Democratic policymakers, told the news outlet that his talks with White House officials have lead him to believe the threshold will be increased to somewhere around the $42,000 mark.

This, according to Eisenbrey’s calculations, would cover 35% of salaried workers. While that’s still a far cry from the 12% of salaried workers covered by the existing threshold, it doesn’t make as many employees OT-eligible as some smaller firms had feared.
Lawmakers on Capitol Hill estimate an increase to $51,000 — which has been advocated by the likes of Vice President Joe Biden and former chief economist Jared Bernstein — would make 47% of salaried workers OT-eligible.

Why settle on the lesser amount?
As is often the case with policymaking, it’s likely a compromise between lawmakers who’d like to see half of salaried workers OT-eligible and those who feel the threshold isn’t in need of major tweaking.

The timeline
While the new OT regs were expected by the end of 2014, the DOL came out last fall and said it needed more time.
Now it’s expected the DOL will issue the proposed regs sometime in February. The delay most likely means employers don’t have to worry about the new regs kicking in until sometime in 2016.
The only way they’ll kick in before year-end is if the Obama Administration fast-tracks the new rules, which isn’t out of the realm of possibility.

Tammy McCutchen, a former administrator for the DOL’s Wage and Hour Division, who has sat in on a number of “listening sessions” with DOL Secretary Thomas Perez about the reg changes, said employers should look at the proposed regs as if they were final rules. Why? The DOL isn’t likely to make wholesale changes to its initial proposal. And because the agency isn’t likely to make many revisions, the new regs could be put into effect pretty quickly.

Another thing to keep in mind: The minimum salary isn’t the only thing that will be revamped. The “duties test” is also likely to receive significant editing.

The DOL is likely to narrow the test in another effort to make more employees OT-eligible. For example, some legal analysts are predicting the DOL will adopt California’s duties test, which requires a manager to spend more than 50% of their time supervising employees before he or she is considered OT-exempt.

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