Monday, March 28, 2016

Final Regulations on 'White Collar' Exemption Expected

PNN: New White Collar Regs

On March 14, the U.S. Department of Labor (DOL) submitted the final "white collar" regulations to the Office of Management and Budget (OMB) for review. OMB has up to 90 days to review, but in practice it often completes its reviews in 30 to 60 days. This is the last step before the regulations will be published in the Federal Register and become effective.

Proposed regulatory changes for salary level tests include:

  • Current salary level requirements. Under the current regulations, an executive, administrative, or professional (EAP) employee must be paid a salary of at least $455 per week ($23,660 per year) in order to come within the standard exemption; in order to come within the exemption for highly compensated employees (HCE), such an employee must earn at least $100,000 in total annual compensation.
  • 40th percentile. In order to maintain the effectiveness of the salary level test, the DOL proposes to raise the standard salary level to an amount equal to the 40th percentile of earnings for full-time salaried workers, which is projected to be $970 per week, or $50,440 per year. Note: If the final regulations adopt the proposed salary level of the 40th percentile of weekly earnings, the DOL would likely rely on data from the first quarter of 2016 to determine the salary level (the proposed regulations included figures for 2013 and projected the $970 per week figure for the first quarter of 2016).
  • 90th percentile. The DOL is also proposing to raise the exemption for HCEs from the current level, which is at least $100,000 in total compensation, to an amount equal to the 90th percentile of earnings for full-time salaried workers ($122,148 annually in 2013).

Duties Tests Not Changed
The DOL did not make specific proposals to modify the current duties tests but did seek comments on whether the tests are working as intended to screen out employees who are not bona fide EAP employees; in particular, the DOL is concerned that in some instances the current tests may allow exemption of employees who are performing such a disproportionate amount of nonexempt work that they are not EAP employees in any meaningful sense.

Comment Review and Release of Final Regulations
In response to the proposed regulations, the DOL received over 270,000 comments. DOL has reviewed those comments and determined what changes, if any, to make to the final regulations. It appears that DOL is working to finalize the regulations as quickly as possible. A regulatory agenda timetable, published in the Federal Register on December 15, listed the date for the final rule as "07/00/16" [80 F.R. 77819, 12-15-15]. In February, in widely publicized remarks before the American Bar Association's Midwinter Meeting of the Federal Labor Standards Legislation Committee, the Solicitor of Labor M. Patricia Smith indicated that the DOL expects to release the rules by late spring or early summer.

Read more in PAYROLL CURRENTLY, Issue No. 3, Vol. 24, and check back with Pay News Now for more information as we monitor the proposed regulations.