In a move that could have a long lasting impacts on employers large and small, President Barack Obama announced today that he intends to ask the Secretary of Labor to expand the number of employees who would be guaranteed protection by overtime protections contained in the Fair Labor Standards Act (FLSA). It is expected that the President’s proposals would allow millions more workers to qualify for overtime pay. At the same time, the changes could have a considerable financial effect on the ability of employers to maintain their workforce.
The President’s proposal primarily focuses on two areas of overtime “white collar” exemptions – the minimum weekly salary requirement and the elements of the managerial exemption.
The salary basis requires that employees subject to the managerial, professional, and administrative overtime exemption be paid a minimum weekly salary of $455 per week (some states have a higher threshold). This amount was last raised in 2004. According to the President, only 12 percent of salaried workers currently fall below the threshold (as opposed to 65 percent in 1975), thus justifying the need for a threshold increase. The President has not indicated a specific salary threshold that he believes would be acceptable.
The President’s proposal also asks the DOL to look at revising the requirements for the white collar exemptions to “update existing protections” and “simplify” the overtime rules. It is expected that the new proposals will primarily affect salaried employees such as fast-food restaurant supervisors and convenience store managers who often are expected to work more than forty hours per week and currently do not qualify to receive overtime pay. Employers of workers who would likely fall under the revised rules have expressed concerns that, in conjunction with the new healthcare law, they will be forced to lay off employees and raise prices of products.
The President’s request will be issued through a presidential memorandum given directly to the DOL and thus will bypass discussion in Congress. However, the DOL will be required to go through formal rule making requirements to change the regulations. During this process, the employers will have the opportunity to provide comments to proposed rules. As such, any changes to the overtime regulations are not expected to be implemented until 2015.