In May, the U.S. Department of Labor (“DOL”) published its amended regulation regarding the so-called “White Collar” exemption from the Fair Labor Standards Act (“FLSA”). As a result, manufacturers may either have to boost the wages of some employees or radically change the manner in which those employees are compensated.
Under the FLSA, employees must be paid at least minimum wage for all hours worked and time-and-one-half the employees’ hourly wage rate when the employees work more than 40 hours per week. “White Collar” employees (bona fide executive, administrative and professional employees, certain computer programmers and some others) are “exempt” from these requirements if those employees are paid on a “salary basis,” perform exempt duties and otherwise meet the exemption requirements. The revised regulations raise the minimum salary which must be paid to qualify for the exemption from $455.00 per week ($23,660.00 annually) to $913.00 per week ($47,476.00 annually). Beginning in 2019, the minimum salary level will be adjusted upwards annually.
Employees who do not make the minimum salary, no matter what job duties they performed, must now be paid on an hourly basis and be paid overtime. Employees affected by the amended regulations (those making $23,660.00 or more annually, but less than $47,476.00) must either have their salary raised or be treated as all other hourly workers.
Responding to the amended regulations will not simply be a mathematical exercise. For those previously exempt employees making less than $47,476, manufacturers must now convert them to hourly workers and will have to consider other wage and hour issues associated with hourly workers. Manufacturers must keep detailed time records for all such workers (starting time, ending time, hours worked per day, hours worked per week, among other things); generally must pay employees for all travel during the employees’ normal work schedule (even when the employees travel on a non-work day); and may be obligated to pay employees who perform services outside of their normal schedule (such as answering phone calls or emails on weekends).
Significantly, the new regulations did not change the “duties” test to require that more than fifty percent of the exempt employees’ work time be spent performing exempt duties, a change which could have dramatically affected employees working as foremen, leads, or first level supervisors.
The new regulations take effect on December 1, 2016, giving manufacturer’s a bit of time this summer and fall to consider the challenges presented.