In 2015, the U.S. Department of Labor (DOL) issued proposed regulations that would revise the requirements for the white-collar exemptions under the federal Fair Labor Standards Act (FLSA). The DOL has not yet issued the final regulations. This article explains the steps employers should take in response to the proposed regulations. 
FLSA and the proposed regulations
The FLSA generally requires employers to pay nonexempt employees at least the federal minimum wage (currently $7.25 per hour) for all hours worked plus overtime compensation for all hours worked over 40 per workweek. Under the FLSA, executive, administrative, professional, computer, and highly compensated employees are exempt. Those exemptions are commonly known as the white-collar exemptions. To qualify for one of the exemptions, an employee must satisfy the salary basis test and the duties test. Under the salary basis test in the current regulations (which the DOL issued in 2004), an employee must be paid at least $455 per week on a salary basis.
On July 6, 2015, the DOL proposed regulations that would increase the salary requirement for white-collar exemptions from $455 per week to $970 per week. The public had 60 days (through September 4) to submit comments to the DOL regarding the proposed regulations. The DOL is considering the public’s comments and is expected to issue final regulations in 2016. The proposed regulations did not affect the duties tests. The final rules could be the same as the proposed regulations, or they could be different.
The proposed rule was sent to the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs on March 14. Judith E. Kramer, an attorney with Fortney & Scott LLC in Washington, D.C., said OMB review typically takes 30, 60, or 90 days, but she expects this review to be on the shorter end of the scale so the regulations can go out quickly, possibly in April or May.
Steps employers should take
Step 1: Analyze positions presently classified as exempt to ensure they satisfy the current regulations. The proposed regulations would make it more difficult for employees to qualify for an exemption. Thus, if a position is nonexempt under the current regulations, it will be nonexempt under the proposed regulations. Therefore, you should identify all positions presently classified as exempt and make sure that they satisfy the current regulations. If you would like your analysis to be protected by the attorney-client privilege, consult with counsel during the analysis.
If any positions are misclassified as exempt, you should reclassify them as nonexempt. However, before reclassifying positions, consider the potential impact of reclassification, including how you will address employees’ claims that they were misclassified as exempt.
Step 2: Make sure job descriptions for positions correctly classified as exempt under the current regulations accurately reflect the nature of the jobs. Employers could face lawsuits or DOL audits at any time, including before the DOL issues the final regulations. In the event of a lawsuit or DOL audit, it is important that job descriptions for exempt positions accurately state the job duties and don’t give an impression that the positions are nonexempt.
Step 3: Identify positions that would no longer be exempt under the proposed regulations. Identify exempt employees who presently earn less than $970 per week. Those employees would no longer be exempt under the proposed regulations if you do not increase their pay.
Step 4: Consider what to do about employees who would no longer be exempt under the proposed regulations. If an employee is exempt under the current regulations but would no longer be exempt under the proposed regulations because he is paid less than $970 per week, you could (1) continue to treat him as exempt by increasing his salary to at least $970 per week or (2) reclassify the position as nonexempt.
Both options have advantages and disadvantages. Under the first option, the employee would not have to record and report all hours worked, and you would not have to pay overtime compensation. However, you would need to increase the employee’s salary to at least $970 per week. Conversely, under the second option, while you would not have to increase the employee’s salary to at least $970 per week, he would have to record and report all hours worked, and you would have to pay overtime compensation.
Because each job is different, employers should make this decision on a position-by-position basis. For example, if a position doesn’t require more than 40 hours per week or it is feasible to restructure the position so that employees will work no more than 40 hours per week, it may be better (depending on the facts) to reclassify the position as nonexempt instead of increasing employees’ salaries.
Of course, because the final rules could be different from the proposed regulations, employers should not make any changes yet. Instead, simply consider your options until the DOL issues the final regulations.
Bottom line
At this time, employers should develop a plan to reclassify positions that are presently misclassified as exempt and make sure they have accurate job descriptions for positions that are correctly classified as exempt under the current regulations. For positions that would no longer be 
exempt under the proposed regulations, employers should start thinking about what they will do. However, hold off on making any changes until the DOL issues the final regulations.
Tareen Zafrullah is an attorney with Faegre Baker Daniels LLP (Indianapolis). If you have questions about this issue or any other employment concerns, you may contact him at tareen.zafrullah@faegrebd.com.
Need to learn more? With the DOL’s newly proposed overtime exemption rules close to becoming final, “exempt vs. nonexempt” is, understandably, one of the hottest HR issues today. Once the new rules are in effect, any one of many possible management mistakes could put your exempt employees’ status in jeopardy, making them entitled to overtime compensation and creating a huge liability for your organization. You may also face fines for FLSA violations. Join us on April 28 for the BLR webinar Overtime Exemption at Risk: Practical Strategies for Managing Exempt Employees in Compliance with the New FLSA will show you the trouble spots to watch for—and the proactive strategies for minimizing your legal risks. For more information, go to http://store.hrhero.com/overtime-exemption-042816