On May 5, 2015, the U.S. Department of Labor (DOL) sent proposed regulations to the Office of Management and Budget (OMB) for review before they are published for comment in the Federal Register. The proposed regulations are expected to overhaul the current “white-collar” regulations, which define the parameters for classifying employees as exempt from the minimum wage and overtime protections of the Fair Labor Standards Act (FLSA). While the proposed rules have not yet been made public, there is no doubt that the DOL has put forth changes that will significantly increase the number of employees who are entitled to overtime compensation when they work more than 40 hours in a workweek.
President Orders Revisions
The rule changes are being issued in response to a Memorandum released on March 13, 2014, in which President Barack Obama directed the secretary of labor to propose revisions to “modernize and streamline the existing overtime regulations.” (See link to Presidential Memorandum: https://www.whitehouse.gov/the-press-office/2014/03/13/presidential-memorandum-updatingand-modernizing-overtime-regulations). In his blog posting on May 5, 2015 Secretary of Labor Thomas Perez stated:
“The rules governing who is eligible for overtime have eroded over the years. As a result, millions of salaried workers have been left without the guarantee of time and a half pay for the extra hours they spend on the job and away from their families.
We’ve worked diligently over the last year to develop a proposed rule that answers the president’s directive and captures input from a diverse range of stakeholders. After extensive research, study and careful analysis, we have submitted the proposed rule to the [OMB] for review. In the near future, the public will have an opportunity to weigh in and help us craft a final rule.”
It is likely that the DOL will propose a substantial increase in the salary threshold for exempt status. Currently, in addition to performing exempt duties, an employee must be paid a salary of at least $455 per week ($23,600 per year) to be classified as exempt. The DOL will also likely propose to revise the “primary duty” test to make it more difficult for an employee with both exempt and nonexempt duties to qualify for an exemption.
Under the current regulations, an employee who supervises at least two other employees but also spends a majority of his time performing nonexempt duties may be properly classified as exempt as long as supervising other employees is the most important duty he performs. It is anticipated that the DOL will propose that to be considered exempt, an employee must spend more than 50 percent of his time performing exempt duties.
The “Take Away”
Publication of the proposed regulations is expected early this summer. The public will be afforded 60 to 90 days to submit comments before the DOL issues final regulations. In the meantime, employers should start planning for significant increases in the number of employees who will be entitled to overtime compensation. We can help you and your Clients plan accordingly. Call or email us today.