FLSA Delay’s Proposed Rule: Get Out In Front of It

According to Allen Smith in his SHRM article, “FLSA Proposed Rule Delayed,” the Fair Labor Standards Act is now expected to be finalized in the first quarter of 2015 instead of its original release date of November 2014. This prolongation creates a greater period of uncertainty for employers. The advice given by the author and his sources is to act quickly. Do not wait for the final rule to begin aligning your business with the regulations. The time it takes to meet regulations may be too long and heightens the chance of earning the scrutiny of the DOL in the interim. Begin adjusting your practice based on the proposal because there is usually little delineation between the proposed rule and the final ruling. The repercussions of waiting it out could be horrendous for your bottom line. Internal audits of FLSA classifications can cost up to a few thousand dollars per job to review, and Smith notes that, “McCutchen ballparked a review of 120 jobs at $200,000, noting that a review takes hours of work, encompassing evaluations of job descriptions and interviews with employees, while becoming conversant with new regulations. Then if reclassification is needed, the human resources information system may have to be changed with adjustments for benefits. Compensation itself may have to be completely redone.” It is crucial for business to begin working on their practices now. A likely addition to the new rule includes, “the minimum salary threshold level for a white-collar exemption is anticipated to increase from the current $455 per week or $23,660 per year…a paper prepared by the Economic Policy Institute and funded by the DOL recommended a salary level of $970 per week or $50,440 per year.” These big changes could have serious implications on the classifications your business currently uses. Another change to the rule may require that exempt employees be primarily engaged in exempt duties at least 50% of the time. There are anticipated changes to the executive exemption classification that would downsize the ability to classify an executive as exempt. Furthermore, “Paul DeCamp, an attorney with Jackson Lewis in Washington, D.C., and former Wage and Hour Division administrator, anticipated the DOL will narrow the executive exemption.” The delay in the proposal presents other challenges. The longer the proposal takes to be finalized, the more likely that the ruling will not be concluded during President Obama’s administration. If the proposed rule is not issued during its new expected date sometime in the first quarter of 2015, it may take so long to be finalized that it would become a point of influence during the next presidential elections. Congress can also make the project take longer because it has the power to force the DOL to compromise on its rule. Perhaps a potentially lengthy interim between the proposal and the implementation will benefit your company if it is in dire need of restructuring. The period in which the FLSA proposed rule will become finalized is out of your control, but the power to adjust your business is all yours.

Author: Dana Millio

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