On March 13, 2014, with a collection of American workers standing behind him, President Obama signed a memorandum directing the Secretary of Labor, Thomas Perez, to “propose revisions to modernize and streamline the existing overtime regulations.”
The Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”), proscribes rules regarding minimum wage, child labor, and overtime. Non-exempt employees are normally entitled to at least 1.5 times their regular rate for every hour they work in excess of 40 in a given work week. Regulations governing the administrative, professional, and executive exemptions are commonly known as the “white collar exemptions” and are contained in 29 C.F.R., Part 541. Employees that are paid at least $455 per week on a salary basis ($23,660 per year) and fall within the duties test of one of the white collar exemptions are not entitled to overtime pay. Other statutory exemptions may also apply.
On the heels of President Obama’s executive order raising the minimum wage for those employees of government contractors to $10.10/hour, it seems clear that the proposed revisions will likely be primarily aimed at making it easier for employees to obtain overtime for time worked in excess of 40 hours per week. The memorandum, however, also directs Secretary Perez to “address the changing nature of the workplace” and try to make the regulations easier for employers and employees to understand.
President George W. Bush’s administration revised many of the regulations in 29 C.F.R. Part 541 under the moniker “FairPay” to simplify the regulations. Despite the 2004 overhaul, misclassifying employees as exempt under one of the white collar exemptions remains one of the common pitfalls into which employers fall.
The Department of Labor will likely propose increasing the salary basis threshold for being considered an exempt employee. The Labor Department may also reconsider the duties that workers perform that direct whether they fall within one of the exemptions.
The March 13 memorandum is just a first step in a long process of revising the regulations related to overtime. Once the DOL proposes a rule, there will be a period during which various parties can comment on the proposed regulations. Thereafter, the DOL will revise the rules based on the comments received, await the OMB’s clearance, and then issue final rules.
Changes in the overtime exemptions will have significant impact on employers. I will keep you abreast of developments regarding the proposed overtime regulations as they arise.