On March 13, 2014, the White House’s Office of the Press Secretary issued a statement, “Opportunity for All: Rewarding Hard Work by Strengthening Overtime Protections,” announcing that President Barack Obama, as part of his agenda to focus on the middle class and ensure “a fair wage for a hard day’s work,” will instruct the U.S. Department of Labor (DOL) to make overtime pay available for millions of additional workers by narrowing the Fair Labor Standard Act’s (FLSA) “white-collar” exemptions. The initiative is intended to materially narrow the group of workers who can be exempted from receiving overtime pay under the executive, administrative, and professional exemptions, which could well add pressure to payroll costs and bring added liability risk.
The Presidential Memorandum, available here, instructs the U.S. Secretary of Labor to revise the wage and hour regulations to:
- Update existing protections in keeping with the intention of the Fair Labor Standards Act.
- Address the changing nature of the American workplace.
- Simplify the overtime rules to make them easier for both workers and businesses to understand and apply.
The press release discusses at length that the white collar exemption has not been revised since 2004. The White House emphasizes that the minimum qualifying salary level of $455 per week implemented at that time would be $561 in today’s dollars and, at the current level, does not produce wages reaching the poverty level for a family of four. It seems certain that the $455 per week threshold will rise.
Significantly, the 2004 regulatory change generated tens of thousands of public comments and was issued only after the DOL’s Wage and Hour Division spent approximately a year drafting its original proposal and another year receiving public comments, revising the proposal, and waiting for clearance from the Office of Management and Budget.
The President’s direction is just the first, but still significant, step in a lengthy process. Employers will have the opportunity to comment on the DOL’s proposed regulations. We will be watching this closely and will keep you apprised of significant developments.