In March 2014, President Obama signed a Presidential Memorandum requiring the DOL to take steps to revise the regulations relating to the “White Collar” exemptions in the FLSA. The specific regulations are those that define the exemptions from both minimum wage and overtime for executives, administrative, professional and outside sales employees. Those regulations were last revised in 2004 and had not been revised previously since 1975. While many of the articles regarding this announcement indicated this is something that would be done immediately, as you can see, that is not the case since it has been over a year without the proposal being issued. On May 5, 2015, the DOL sent their proposal to the Office of Management and Budget for review. It is my understanding the OMB is supposed to complete their review in 30-60 days, however, I have known of instances where they took longer to conduct their review.
In order to make changes in the regulations they must go through the rule making process. It is expected that the Department will prepare and publish their proposed changes for public comment. Typically, the comment period will be 60-90 days. Once the comments are received and reviewed they will issue a final regulation which will most likely not be effective for another 90 days. I saw a quote from the Secretary of Labor that it would be months before they issued the proposed changes. During the process of issuing the 2004 regulations the DOL received over 75,000 written comments that required their review, which took several months. I would expect them to receive at least this number of comments regarding any proposed changes at this time. In view of the steps required to change a regulation, I would anticipate it to be at least a year before any new regulations are effective.
While it is not known what changes may be proposed there are several items that I expect to be considered.
- As you know the current minimum salary requirement for these exemptions is $455 per week. According to a White House Official, if the salary had kept up with inflation for the past 10 years, that minimum would now be over $550 per week. I saw another article stating that if the 1975 minimum salary of $155 per week was adjusted for inflation it would be $970 per week. While the amount they will propose is anybody’s guess, I expect there will be a substantial increase in the minimum salary requirement. I recently saw a quote from a respected attorney using the figure of $50,000-$52,000 per year.
- Another area that I expect to be addressed is the definition of “primary duty of management” as used in the regulations which allows an employee to be considered as managing while performing routine (such as running a register, putting up stock, etc.) duties. Some states have statutes that require the management time to be more than 50% of the employee’s work time and the employee is not considered managing while performing the routine duties. It would not be surprising if the proposed regulations contain a similar rule that a specific portion of time be spent in management duties.
- The current regulations relating to the professional exemption allow for exemption to apply to certain employees such as chefs, cooks, nursery school teachers, funeral directors and others even though those occupations do not require degrees in a field of science or learning. I have seen comments that they expect the revised regulations may require an academic degree in order to qualify for the exemption. This exemption was substantially broadened in the 2004 regulations so I believe they will most likely make some changes to limit the applicability of the exemption.
From my experience in seeing the DOL revise regulations, I expect there will be many changes in the final regulations and, while they may not take effect for several months, employers need to be on the alert to ensure they make any necessary changes when the new regulations are put in place.
Dr. David Weil is the current Wage and Hour Administrator. He has previously worked as a professor at Harvard and most recently as a Distinguished Faculty Scholar at Boston University School of Management. During his confirmation hearing before the Senate he stated that a “fundamental role of Wage and Hour Administrator is making sure that the laws entrusted to the agency are administered efficiently, effectively, fairly, transparently and rigorously.” In a report he helped to prepare he listed several priority industries including eating and drinking establishments; hotels/motels; construction; janitorial and health care services among others. The report also recommended the assessment of liquidated damages and civil money penalties where employers were found to have violated the FLSA.
This month, a new minimum wage bill was introduced to increase the wage in the near future to $12.00 per hour. While it appears unlikely the bill will pass at this time, there are no guarantees that it will not come up again during this session of Congress. The amount of FLSA litigation continues to be very high, not only through actions brought by the DOL, but also in the area of private litigation. There were over 8,000 FLSA suits filed in federal courts during 2014. While most litigation concerning the Wage and Hour law involves only civil actions, the Act does contain criminal provisions. I saw this month where an employer was charged under the criminal provisions because he offered a $10,000 bribe to a DOL investigator in exchange for closing an investigation that involved $100,000 in back wages.
In many investigations, the DOL not only seeks back wages, they also seek liquidated damages in an amount equal to the amount of back wages that are owed. For example if they determine that an employer owes $10,000 in back wages they will also request another $10,000 in liquidated damages. Damages collected in this manner are distributed to the employees that are due the back wages. They have been using this procedure for several years when they are involved in litigation but only recently have they instituted this in administrative investigations that involve repeat or willful violations of the FLSA. That fact, even in administratively settled matters where employers can be requested to pay twice the amount of back wages owed, makes it even more imperative that you do everything you can to comply with the FLSA.