In March 2014, President Obama directed the Secretary of Labor to prepare and propose new FLSA regulations. These new rules were to be announced late last year, but have been repeatedly delayed. Now it appears the new rules will be announced later this month. While the scope of the changes is unknown, it is anticipated the changes will reduce the number of employees who qualify for exempt status.

What changes are likely?

One change likely to occur is an increase to the $455 minimum weekly salary threshold for exempt workers. The current threshold means workers earning as little as $24,000 per year can meet the salary basis test. It is likely this will be increased. Some states, like New York and California, already require exempt employees to earn significantly more than the federal minimum weekly salary threshold. New regulations may also change the various job duties tests under the “white collar” exemptions.

When will the changes occur?

Any proposed changes are subject to the rulemaking process of the federal Administrative Procedure Act. This means there are several time-consuming steps that will have to occur before any change could take effect. There will be a public comment period of at least 30 days, hearings, and approval of the revised regulations by the Office of Management and Budget’s Office of Information and Regulatory Affairs. All of this means the changes are not likely to be effective until late summer and perhaps could be delayed further if there are legal challenges to the implementation of the new regulations.

What should you be doing now to prepare?

If the new regulations tighten the FLSA exemptions as they are anticipated to do, this may have a substantial impact on employers. Employers should start preparing for a complete review of exempt classifications under the new rules. This will be a large undertaking, and planning for the process should start now.

The number of employees who may be entitled to overtime is likely to increase. Employers should begin now to evaluate their tracking of employee work hours and consider how those tracking procedures may need to change to address any employees who are no longer exempt.

Regardless of what changes are actually contained in the new regulations, it is clear that change is coming. This change will require a review of all FLSA exemption classifications to ensure compliance. You can start planning now how you can be ready when the new regulations become effective. We will keep you posted on the content and timing of any changes and will work with you to address any changes your organization may need to make in light of the new regulations.