Legal Q&A: Avoiding Added Expenses

How to avoid added expenses from increasing salary.


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Q. What are an employer’s options for avoiding the added expenses that will result from increasing the salary level thresholds?

A. Employers will need to assess their organizations and determine how to react in the best way for the business. Options for currently exempt employees who will be affected will include the following: reclassifying an employee as non-exempt, paying the employee on an hourly basis and either paying time and one-half overtime pay or limiting or ending overtime; reducing overtime hours and possibly transferring the hours to employees who work fewer than 40 hours in a work week; hiring more part-time employees; reducing an employee’s pay, including discretionary pay, such as bonuses, so that after paying the overtime premium pay, the employee’s total pay remains roughly the same; increasing the salary of an employee who is close to the $970 level to an amount above $970 so that the employee remains exempt.

The DOL is also considering proposing other changes that would affect exempt EAP employees such as whether to require that an employee must spend a minimum amount of time, such as at least 50 percent, performing the exempt “primary duty” to qualify for an exemption. If the DOL makes this change, many more currently exempt employees would be converted into non-exempt employees.

The DOL’s proposed regulations will not go into effect until sometime in 2016. In preparation, employers should analyze how many currently exempt EAP employees would be affected, track the number of hours worked (regular and over 40 in a week) by exempt EAP employees now paid between $455 and $970 per week and, most importantly, consider possible counter-measures to mitigate the regulations’ impact. 

Originally published in the October 2015 issue.