By Anne C. Martin

In late June of 2015, President Obama announced changes to the executive exemptions included in the Fair Labor Standards Act of 1938 (“FLSA”) – the federal law that regulates pay for employees.  This change will go into effect sometime in 2016.  What this means for employers is that they will need to reassess which employees they have classified as exempt to ensure that they meet the salary threshold.

The three primary exemptions to the overtime requirements are for executive, administrative and professional employees.  All three require that the employee be paid on a salary basis and the current requirement is that the salary be at least $455 per week, or $23,660 annually. President Obama is raising that salary requirement to $50,400, more than doubling the pay rate.

The other requirements for the three exemptions are as follows:

It is good practice to periodically review the classifications of exempt employees to ensure that they really do meet these tests. With the resetting of the salary basis, all exempt classifications need to be checked to ensure that the subject employees are paid at least that much in salary. If they are not, their employers will either need to raise their pay or reclassify them as non-exempt and pay time and a half for all overtime hours worked.

This change in the law will not be effective until 2016, but as employers enter the third quarter of 2015 and are thinking about budgets for 2016, these pay rates should be reviewed in anticipation of the change.

[1] A full list of all exemptions and the tests associated with them can be found at the Department of Labor’s website at http://www.dol.gov/whd/overtime/fs17a_overview.pdf.