Early in 2014, President Obama signed a presidential memorandum directing the Department of Labor (DOL) to update the regulations defining which white-collar workers are protected by the minimum wage and overtime standards in the Fair Labor Standards Act (FLSA). On Monday, July 6, 2015, the proposed rule responding to Mr. Obama’s demand and seeking to extend overtime entitlement to millions of previously exempted workers was published in the Federal Register.
Under the current rules, workers who earn $455 a week (or $23,660 a year) and perform certain “white-collar” duties are exempt from overtime requirements. However, according to the Obama administration, the white-collar salary threshold is below the poverty threshold for a family of four, and only 8% of full-time salaried workers fall below it. The proposed rule would increase that threshold to as much as $970 a week (or $50,440 a year). Thus, under the proposed rule, workers earning a salary of less than $50,440 a year would have to be paid overtime even if they met the duties test of an exempt employee. Interestingly, the DOL did not propose any changes to the duties test at this time, but instead is seeking feedback regarding whether the test should be modified and how modification would impact employers.
Additionally, the proposed rule would increase the salary threshold to be considered a “highly compensated” employee who is exempt from overtime requirements, raising that bar from $100,000 to at least $122,148.
Interested parties now have until September 4, 2015, to submit written comments on the proposed rule at www.regulations.gov. Once the comment period has ended, the DOL will review the written comments, draft a final rule, and then submit it for interagency review. Thus, the proposed changes likely may not be implemented for a year or more.
However, employers should not let the delay of implementation create a false sense of comfort. If the rule is finalized and implemented as proposed, employers should be prepared for its effects. Job descriptions may need to be revised; workforces may need to be restructured; budgets may need to be reevaluated to accommodate the increased costs; and policies clearly restricting overtime may need to be implemented. When the time comes, employers should consult legal counsel to ensure compliance.