Is Final Rule on White Collar Exemptions a Hidden Opportunity for Employers?

21 March 2016 Labor & Employment Law Perspectives Blog

It is no secret that last summer the Department of Labor (DOL) proposed substantial amendments to the white collar exemption regulations. Namely, the DOL proposed raising the minimum salary threshold from $23,660 to $50,440 and to automatically increase the salary threshold on an annual basis based on inflation or other factors. Well, the amended rules are expected to be published soon – just last week, the DOL sent the proposed final rules to the White House Office of Management and Budget for final review. Last month, the DOL Solicitor of Labor M. Patricia Smith stated the amended rules would be finalized in July 2016 and the effective date would be within 60 days thereafter, and the recent transmission of those rules to OMB means that timetable is likely to be met and even potentially exceeded. Many employers may be looking at this as terrible news.

However, if you are a “glass half full” person, the publication of the final rules may provide a hidden opportunity for employers to reclassify some positions that may have changed over the years and may no longer qualify for an exemption – particularly as the scrutiny on exempt classifications has increased. Reclassifying an employee from exempt to non-exempt can always be risky because it may raise suspicion that the position never should have been classified as exempt in the first place. However, the implementation of new overtime rules likely will require the reclassification of a great number of positions for a variety of employers, including positions that currently clearly satisfy the duties tests for the applicable exemption. Because much reclassification will occur, reclassifying positions (even if the reclassification has nothing to do with the different requirements under the amended rules) may not raise the same kinds of suspicions it would if done in a different time period.

Therefore, the next couple of months may be a great time to reevaluate job classifications with the plan to reclassify, as needed, when the amended rules are finalized. If you do choose to reevaluate/reclassify job positions, keep the following in mind:

  • In contrast to audits conducted by outside attorneys, job classification audits by consultants (non-attorneys), including communications and reports, are generally not privileged.
  • Focus on the job duties actually performed, not the duties listed on the job description.
  • To help accomplish the foregoing, consider updating job descriptions at same time to reflect actual duties performed.
  • If you do reclassify positions, directly reference the DOL amended rules when communicating the change in classification to the employee in order to dispel suspicion. For instance, “the DOL changed the requirements for certain exemptions. Those changes are suspected to result in many jobs being changed from exempt to non-exempt. Due to those new requirements the employer evaluated certain positions and, as a result, is changing the employee’s classification.”
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