President Obama Announces Initiative to Increase Minimum Salary for Employees Exempt From Overtime Requirements


Faced with continuing Congressional refusal to consider an increase to the minimum wage, on Wednesday, President Obama announced his intent to direct the Department of Labor to consider raising the minimum weekly salary threshold for salaried exempt workers. The current minimum of $455 has been unchanged since 2004. It applies to employees classified as executive, administrative or professional. The announcement indicated possible increases in the minimum salary to between $550 and $970 per week.
The administration justified this review based on the effect of inflation on the minimum, and on the view that the current minimum equates to about $25,000 per year. About 3 million workers would be impacted by a change to the minimum salary that only takes inflation into account.
Business groups responded by stating that affected employers would likely cut jobs in the face of increased labor costs. These lower salaried managerial positions are common in the retail and food service industries. The new proposal would not change the duties test for these employees, only increase the minimum salary for employers seeking to claim it.
The new proposal contained no details, and the President directed the Department of Labor to review the issue for the purposes of a rulemaking necessary to put the new salary levels into effect. The minimum salary is set by regulation, and does not require statutory changes to the Fair Labor Standards Act to implement. This process will likely take well over a year, with final rules becoming effective no earlier than toward the end of the Obama administration.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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