By: Marty Heller
In the spring of 2014, President Obama directed the Department of Labor to dramatically update the regulations covering the “white collar” exemptions (primarily the executive, administrative and professional exemptions). Although the President’s exact directive to the Department of Labor was not public, speculation was that the President wanted to both increase the minimum salary for these exemptions and to modify the “duties” tests in the regulations to make them easier to understand and comply with.
Almost a year and a half later, the Department of Labor has issued proposed regulations that dramatically increase the minimum salary requirement that may qualify for the white collar exemptions under the FLSA. A copy of the proposed regulations are available here. The proposed regulations increase the minimum salary to $970 per week (about $50,000 per year), up from the current minimum salary of $455 per week (about $23,000 per year). The regulations also tie this figure to national average income figures so that it will increase over time. Surprisingly, the proposed regulations do not make any changes to the duties tests of these exemptions, although they do seek public comment regarding whether additional changes should be made. Another significant change in the proposed regulations seeks to increase the level which may qualify for the “highly compensated employees” exemption from $100,000 to $122,000.
While these rules are not yet final, the dramatic proposed increase to the minimum salary threshold is expected to make 5 million white collar workers who currently are exempt eligible for overtime pay. The proposed rule is open for comments from the public until September 4, 2015, and several employer groups, particularly employers in the retail and restaurant industry, are expected to take a strong stance against the changes.
Some version of the regulations likely will become final late this year. In the interim, employers should immediately review their exempt positions, and determine whether they are paid enough to qualify for an exemption under the proposed rules. In cases where an employee cannot qualify for a “white-collar” exemption, it is possible that they may qualify for a different FLSA exemption. Employers also may consider whether to pay employees under an alternative pay method, such as the fluctuating work week.