Hickok & Boardman

By Michelina Covey

The FLSA is the backbone of the wage payment system in the United States and was first implemented in 1938 to set standards for minimum wage, overtime pay for non-exempt employees, record keeping requirements and youth employment affecting employees in both private and public sectors.

For the first time since 2004, the minimum salary threshold rate for Exempt employees was increased to $35,568/year (previously at: $23,360) in 2020 to bring wages more in line with the costs of living and reality. Although much lower than the original proposed salary of $47,476, progress was made, nonetheless.

Almost 3 years after the last increase, the FLSA is about to take center stage once again. With a tentative date of October 2022, the Department of Labor (DOL) will be releasing a proposed ruling and soliciting public comment.  Although the specifics of the proposed rule remain unknow, many are anticipating on seeing the following make an appearance.  Are you ready?

New Salary Threshold Level:

The DOL is feeling pressure to raise the salary threshold rate to the level originally proposed or $47,476 blocked by the courts in 2016.  Some advocates are seeking a rate more than double the current rate.

Creating an Automatic or Annual Salary Level Increase

Yes, you read that correctly.  Automatic increases will ensure the maximum annualized salary for the overtime rule adjusts and is tied to the consumer price index or another economic indicator. This will allow for natural increases without having to go through a formal rulemaking process. This may also help avoid dramatic increases in short periods.

Amending the Duties Test

An employee must make more than the maximum salary threshold AND meet the duties test criteria in order to be considered Exempt.  This means the employee’s job duties must fall within the duties and classification professional, administrative, or executive exemption.

The DOL has considered modifying the duties test in the past but has refrained from doing so however, some have suggested that the DOL and Administration may amend the duties test to align more closely with the California standards for overtime exemptions this time around. Under California state law, employees must spend more than 50% of their time performing exempt duties to be classified as exempt from overtime requirements.

So what does all this mean?  What happens next?

Once the DOL publishes the proposed rule in the Federal Register, there will be an opportunity for public comment where employers can voice their opinions to the DOL about the impact of the proposal.  Upon closing, the agency will review comments and determine whether to move forward with a final ruling.

Although this process can be lengthy, employers are encouraged to continue following the current rules until changes are confirmed.   In the meantime, now may also be a good time for employers to consider how in compliance they are with the current FLSA standards with a preliminary audit. When was the last time job descriptions were updated?  Do you have job descriptions?  Are the positions currently classified correctly?   Are you currently in compliance with FLSA?

There’s no better time than the present to make sure you’re in Compliance.  Exactly what that may mean tomorrow, next week or next year is yet to be determined but being prepared and aware of what’s to come will only help you better prepare.