The Department of Labor has been promising an overhaul of the white collar exemption regulations for over a year. The regulations were originally planned to be released in the Fall of 2014, but were pushed back to February 2015. We are now in April, and the regulations have not yet been issued. All has been quiet recently, which probably means that the regulations will be coming any day.
What to look for in the new regulations:
- Increased salary threshold: Currently, the minimum salary for an employee to be exempt from overtime is $455 per week or $23,660 per year. The Department of Labor is expected to raise this threshold to $40,000 or even $50,000. Other ideas being considered include geographic thresholds (to account for different costs of living) and indexing the salary threshold to inflation.
- Changes to Duties Tests: The white collar exemption regulations last received an overhaul under the George W Bush administration in 2004. The Obama administration is expected to undo some of these positions, and make it harder to satisfy the exemptions from overtime. One expected change would be to add a “percentage of duties” test, which would require the exempt employee to spend a majority of his or her time on exempt tasks. Currently, federal law only requires that the employee’s primary, or most important, duties be exempt.
Depending on your company’s geographic location, and the nature of your business, an increase in the salary threshold could mean a significant shock to your company’s payroll costs. After all, if the minimum salary moves upward, this tends to have an inflationary ripple effect throughout the pay scale as companies strive to retain the differences in relative pay between workers.