In March 2014, President Obama issued a memorandum to the U.S. Secretary of Labor directing the Secretary to modernize and streamline the existing overtime regulations for executive, administrative, and professional employees. The regulations, codified at 29 C.F.R. Part 541, provide the rules for the so-called “white collar” exemptions to overtime pay requirements, as well as the rules for classifying outside salespersons and computer employees.
The proposed rule was released earlier this morning. The USDOL proposes to raise the minimum salary for exempt status under the white collar overtime exemptions from $455 per week (or $23,660 per year) to as high as $970 per week ($50,400 per year). The increases are proposed to be benchmarked, at least initially, to the 40th percentile of earnings for full-time salaried workers, as compiled by the Bureau of Labor Statistics.
In addition, the USDOL proposes to raise the minimal level of total annual compensation for “highly compensated employees”—who are deemed exempt under federal law if they “customarily and regularly” perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee (even if such duty is not their “primary duty”)—from $100,000 to at least $122,148.
The DOL is proposing to include in the final rule a mechanism to automatically update the salary and compensation thresholds on an annual basis using either a fixed percentile of wages or the Consumer Price Index.
There were no proposed changes to the duties tests for exempt status, despite the anticipation that the USDOL would move from the more qualitative “primary duty” test to a quantitative, percentage-of-time-spent test.
The proposed rule will be published in the Federal Register and open to comment by the general public.