Declaring that the regulations under the federal Fair Labor Standards Act are “outdated” and that “millions of Americans lack the protections of overtime and even the right to the minimum wage,” President Barack Obama has issued a Presidential Memorandum directing the Secretary of Labor to propose regulations to modify the so-called “white collar” overtime exemptions. Although no proposals for revising the regulations have yet been developed or announced, it is anticipated that the proposed revisions will seek to increase the salary level and potentially revise the duties tests required for the exemptions. There is no current timetable for proposing amendments or implementing revised regulations.
Expected Changes to Overtime Regulations
Through the Presidential Memorandum, the President directed the Secretary of Labor to “modernize and streamline the existing overtime regulations.” In doing so, the President directed that the Secretary “shall consider how the regulations could be revised to update existing protections consistent with the intent of the [Fair Labor Standards] Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.”
Some clues about the anticipated proposed revisions are included in the Fact Sheet released by the White House. First, the President’s stated goal is to “help make sure millions of workers are paid a fair wage for a hard day’s work and rules are simplified for employers and workers alike.” In addition, the Fact Sheet states that the salary threshold for the “white collar” exemptions has only been updated twice in the last 40 years (in 1975 and 2004) and has failed to keep up with inflation, leaving “millions of low-paid, salaried workers without” overtime protections. This indicates that the regulations likely will propose a new salary level in order to be considered exempt under the white collar tests.
The Fact Sheet specifically references “a convenience store manager,” “a fast food shift supervisor,” and “an office worker” as examples of individuals who “may be expected to work 50 or 60 hours a week or more . . . and not receive a dime of overtime pay,” signaling that positions in these industries or categories may be targeted.
The Presidential Memorandum does not set any timetable for the announcement of proposed amendments to the regulations or the implementation of any revisions. The proposed regulations will need to be drafted, go through a notice and comment period, and then await clearance from the Office of Management and Budget before any final regulations are issued or become effective.
Guidance for Employers
The White House’s references to “millions of people” potentially benefiting from the anticipated revisions signal the potential impact of the anticipated revisions.
Given that the proposed regulations will be subject to notice and comment, there should be some time for employers to evaluate the impact of these developments before they are subject to any new requirements. Employers should begin to consider, however, how increases to the required salary level and revisions to the duties tests under the “white collar” exemptions may impact long-standing staffing and compensation models for a wide range of employees.
Once the proposed revisions are announced, employers should consider submitting comments to ensure that the regulatory record reflects the true impact of any proposed changes and to shape the final rules.
Morgan Lewis is closely monitoring the developments and will be providing timely updates and guidance to the employer community.