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The Employer, Vol. 8 No. 4

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DOL’s New Regulations Regarding “Exempt” Employees

On July 6, 2015, the Department of Labor (DOL) published proposed regulations that dramatically change the criteria by which employees qualify as “exempt” from the overtime requirements of federal law.  The regulations affect what are commonly known as “white collar” employees, those engaged in executive, administrative, professional and outside sales positions.  By the DOL’s own estimate, if these regulations go into effect as written, an additional 5 million employees will become  entitled to receive overtime pay.

Under federal law employees must meet two tests before they are considered “exempt” from the overtime requirements.  Those tests are known as the “salary basis” test and the “primary duty” test.  The proposed regulations affect only the salary basis test, and raise the current minimum salary ($455.00 per week, or $23,660 per year) to a new, and indexed rate that is equal to the 40th percentile of weekly wages for all full time salaried employees as determined by the DOL’s Bureau of Labor Statistics.

By “indexing” the minimum salary, the DOL has insured that employers will have to closely monitor whatever salaries they pay, and to do so at least once every year, or risk the loss of the “exempt” status of certain employees simply due to the periodic increase in the minimum salary level.  The 40th percentile for 2016 (the year during which these regulations are likely to become effective) is projected to be $970.00 per week, or $50,440.00 per year.  This represents a dramatic increase of over 100%, and is likely to catch in its reach a large number of employees who have previously been treated as “exempt.”

In addition, the DOL asked for public comments concerning whether additional forms of compensation should be included within the “salary” levels mandated by these new regulations.  Historically, DOL regulations have excluded all bonus payments, but the DOL is now indicating its willingness to consider whether to include non-discretionary bonuses and other incentive payments when considering whether the new salary levels have been met.

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Furthermore, the DOL said that it has no current intent to modify the “primary duty” test for the white collar exemptions.  However, it did invite public comment on certain aspects of the primary duty test, most notably whether there should be some minimum amount of time that an employee must devote to specific duties (such as 50% of their normal work time) before qualifying for “exempt” status.

The time for public comment on these proposed regulations will end on September 4, 2015.  They are, therefore, subject to change based upon input provided during the comment period.  However, employers should begin now an immediate review of their current salary levels to determine how many of their employees, whom they might currently consider to be “exempt” and to whom no overtime is paid, would fall under the new salary thresholds and therefore qualify for overtime pay once they have worked more than 40 hours in a week.  In addition to how these proposed regulations will affect current employees, employers should also be aware of how they will affect new hires, and how to structure any salary increases and incentive compensation programs in the meantime.

If you have any questions concerning how these proposed regulations might affect your company or any of your employees, please call a member of our Employment Law Practice Group.

Congress Increases ACA penalties

With little fanfare, in June Congress approved significant increases to the penalties assessed to employers who fail to timely file, or who file incomplete or inaccurate tax returns.  This increase no only affects the filing of returns employers are familiar with, such as W-2’s and 1099’s, but also the new forms required under the ACA. The penalties have increased from $100 per employee per day, to $250 per employee per day.  The maximum penalty that may be assessed to employers has also increased from $1.5 million to $3 million.

 

Supreme Court ruling may create need to open special enrollment period

Since the Supreme Court’s ruling in June in Obergefell v. Hodges, which legalized same-sex marriage in all states,  employers who offer health insurance benefits to spouses and children, but who did not previously offer health insurance benefits to same sex spouses or their dependent children may need to open to a special enrollment period.

Newly married couples generally qualify for a special enrollment period due to a change in status.  However, same sex couples who may have been married in other states where such marriages were legal, weeks, months, or years ago should also receive a special enrollment period if their marriages were not recognized for purposes of health insurance benefits on the same terms and conditions as other married couples.

Employers should check with their insurance provider to determine whether they need to open a special enrollment period.

 

 

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