On March 13, 2014, the President signed a Presidential Memorandum directing the Department of Labor (DOL) to “propose revisions to modernize and streamline … existing overtime regulations.” Although not mentioned directly in the Memorandum, the purpose behind the directive is to increase the number of workers eligible for overtime pay by making it more difficult for workers to qualify for exemptions from the FLSA’s overtime protections.
In a brief speech before signing the Memorandum, the President opined that “millions of Americans aren’t getting the extra pay they deserve … because an exception that was originally meant for high-paid, white-collar employees now covers workers earning as little as $23,660 a year.” The President further noted that for those workers who fall under this exception, “[i]t doesn’t matter if what you do is mostly physical work like stocking shelves … your employer doesn’t have to pay you a single extra dime.”
Currently, at this early stage, the extent to which the DOL will propose revisions to overtime regulations remains unclear. However, it is expected that the DOL’s proposed revisions will include, at a minimum, a proposed increase to the $455 per week salary threshold necessary to qualify for several “white collar” exemptions (although it is unclear just how high a number the DOL will propose) and a proposed revamping of the executive exemption’s duties test so that workers must devote a fixed percentage of their time to managerial tasks in order to qualify for that exemption. Both revisions would move federal law closer to California’s employee-friendly wage laws that include an elevated $640 per week salary threshold for certain “white collar” exemptions, and require workers to spend at least 50% of their time performing managerial tasks to qualify for the executive exemption.
The directive has initiated what could prove to be the most substantial changes to federal wage-and-hour law in over a decade. The Administration has promised that the DOL will consult with both workers and businesses in drafting the proposed revisions, but employers can certainly expect that the revamped rules will be designed to increase the number of overtime-eligible employees. Currently, there is no timeline for when we can expect to see the initial proposed revisions, and it is likely to be a long process that should include significant public comment. We will continue to keep you apprised of any developments on this issue as they arise.