On July 6, 2015, the Department of Labor’s Wage and Hour Division (DOL) unveiled its proposed rule regarding changes to the Fair Labor Standards Act (FLSA) overtime pay protections that would result in an estimated 5 million salaried “exempt” workers becoming entitled to overtime pay.  Industry observers are concerned that, if adopted as proposed, the rule would significantly drive up labor costs.

ISSA’s Bill Balek reports that under current FLSA regulations, if you have workers who earn less than $23,660 a year, or $455 a week, and they work 40 hours a week, the DOL considers them “non-exempt” employees, and you're obligated to pay them time-and-a-half for any hours they work over that.

The proposed rule would more than double the salary threshold for employees who are eligible to receive overtime pay, from $23,660 to $50,440. Moreover, for the first time ever, the DOL is proposing to index the salary test for all exemptions annually based on percentiles of earnings or changes in inflation. This significant change would require employers to review their classification of exempt employees annually to ensure compliance with the salary test.

It is important to note that DOL has not proposed any regulatory changes to the duties tests, which require employees to perform certain primary duties to qualify for an overtime exemption.  However, DOL is seeking feedback on whether these duties tests should be revised.

DOL estimates that this rule would:

 • Directly affect 4.6 million workers in the U.S, and total direct employer costs for Year 1 are estimated to equal $592.7 million dollars. 
 • Cost each small business, on average depending on the number of workers covered by the regulation, $100 to $600 in direct costs and $320 to $2,700 in additional payroll costs to employees in the first year after the promulgation of the proposed rule.
 • Cause each small business to spend one hour of time for regulatory familiarization; one hour per each affected worker in adjustment costs; and five minutes per week scheduling and monitoring each worker expected to be classified as overtime eligible as a result of the proposed rule. 

For more information, please see the DOL fact sheet on the proposed changes.

In response to this proposed rule, ISSA will be submitting comments to DOL on this subject, and would very much like your feedback. How would this proposal impact your business operations? Please consider sharing the following:
 • Estimated financial impact on your annual labor costs
 • Any anticipated layoffs of employees
 • Effect on your day to day operations

Send your comments along these lines and other pertinent information to Bill Balek, ISSA, bill@issa.com no later than August 12, 2015.