On March 13, 2014, President Obama issued a memorandum to the Secretary of the Department of Labor (“DOL”) instructing that agency to update and modernize certain overtime exemptions to the Fair Labor Standards Act (“FLSA”), which is the federal law that provides basic rights and wage protections for American workers such as the Federal minimum wage and overtime requirements.
Specifically, the memo instructs the DOL — which is the agency responsible for developing regulations interpreting the FLSA — to review its overtime exemptions for executive, administrative, and professional employees, often referred to as the “white collar” exemptions. The memo states that the white collar exemptions “have not kept up with our modern economy” and that because of these outdated regulations, “millions of Americans lack the protections of overtime and even the rights to the minimum wage.” The president’s memo did not include any specific directives, and instead only generally states that the DOL should consider how its regulations could be revised to address the changing nature of the workplace and simplify the regulations to make them easier for both workers and businesses to understand and apply.
This updating process will be subject to the normal rulemaking process, which requires the DOL to formally propose a rule, give the public an opportunity to comment, consider making revisions based on those comments, await clearance of the rule by the White House Office of Management and Budget, and then issue the final rule.
Under existing law, to qualify for the white-collar exemptions, employees must be paid at least $455 per week on a salary basis, and their job duties must meet specific tests — such as including managerial or supervisory responsibility or requiring advanced knowledge or independent judgment. While it is unclear just what changes the DOL will ultimately make to the white-collar exemptions, at a minimum, it is expected that that the current salary requirement of $455 per week will be raised substantially thereby altering the exempt status of countless employment positions.
Employers should keep abreast of developments during the rulemaking process and consider submitting comments after the DOL issues an initial rule. In doing so, employers should consider analyzing how an increase in the salary requirement might impact their business. Once the final rule is issued, it is likely that employers will have to review how they classify workers for overtime purposes and consider paying certain workers more money in order to retain their exempt status