DOL Proposes Revisions to White-Collar Overtime Exemptions

The U.S. Department of Labor (the “DOL”) has issued a “Notice of Proposed Rulemaking” (“NPRM”) aimed at increasing the number of white-collar employees eligible for minimum wage and overtime pay protections under the Fair Labor Standards Act (the “FLSA”).

The FLSA guarantees a minimum wage and overtime pay at a rate of not less than one and one-half times the employee’s regular rate for hours worked over 40 in a work week unless an employee falls under a statutory exemption. For an employee to be classified under one of the so-called “white-collar exemptions” (executive, administrative, or professional), the employee must meet certain minimum tests related to his or her primary job duties and be paid on a salary basis at not less than a specified minimum amount.

Under the NPRM, the salary threshold for a full-time, salaried employee to be classified as exempt from the overtime laws would be increased from $455 per week (or $23,660 annually) to $970 per week (or $50,440 annually). These proposed figures would set the standard salary level at the 40th percentile of weekly earnings for full-time, salaried employees. Additionally, the DOL proposes to increase the annual salary requirement for the highly compensated employee exemption (which applies to employees who customarily perform one or more of the exempt duties of an executive, administrative, or professional employee) from $100,000 annually to $122,148 annually. The DOL has updated the salary-threshold requirements seven times since 1938, most recently in 2004. The NPRM also creates a mechanism to automatically update the salary-threshold levels annually in the future.

The DOL predicts that, if finalized, the NPRM will extend overtime coverage to an additional five million Americans. The NPRM is subject to a 60-day public comment period. Subsequently, the DOL will issue a Final Rule, which will be reviewed, before publication. While a Final Rule is not expected before 2016, it is not too soon for businesses to start thinking about how to address these likely changes in their policies and practices.

A fact sheet describing the proposed rule may be found on the Department of Labor Website or here. A complete copy of the proposed rules is available here.