President Obama directed the U.S. Department of Labor (“DOL”) to issue changes to the regulations governing the Fair Labor Standards Act's (“FLSA”) overtime requirements.
While lacking specifics, the Presidential Memorandum and accompanying White House Fact Sheet issued yesterday take direct aim at the current minimum weekly salary of $455 per week necessary to qualify as an exempt employee under the FLSA’s executive, administrative, or professional employee exemptions (the so-called “white collar” exemptions). In instructing that the DOL increase this minimum, the President noted that only 12 percent of American workers fall below this dollar income threshold compared with 18 percent when this amount was established in 2004. In the Fact Sheet touting the directive, the White House cited as examples “a convenience store manager, fast food supervisor or an office worker” who currently qualify for the white collar exemption and work 50-60 hours per week without overtime, with the consequent possibility of their hourly rate falling below the current minimum wage.
The President also appeared to suggest the need for revisions to the so-called duty requirements of the “white collar” exemption. The President points to what he calls the “changing nature of the American workforce” and the failure of the regulations to keep pace “with our modern economy.”
As the Memorandum and Fact Sheet imply, the anticipated changes may well have a greater impact on certain industries, including retail businesses. The National Retail Federation immediately leveled harsh criticisms of the proposal, saying it would “kill jobs.”
Any eventual regulatory change, however, likely will have less of an impact in certain states whose laws already have substantially higher salary thresholds for their comparable state law white collar exemption. For example, in California the threshold is $640 per week, among other criteria. Likewise, in New York it is $600 per week. In both states, these minimums are set to increase substantially over the next several years.
At this point in the process, little guidance has been provided to employers. Nevertheless, it is critical for employers to begin to assess the potential impact of these changes on their businesses and determine what role, if any, they should take individually or through relevant trade associations or other industry groups in the upcoming rulemaking process. As the rulemaking process progresses, it will be equally important to assess the need for any organizational and pay practice changes consistent with both achieving business objectives and minimizing litigation risks.