Controversial Proposed Regulations Expanding Overtime Obligations Likely to Be Released this Month

May 17 2016 | Committees

Written by: Alicia Bendana, Business Law Committee Chair

Arguably, among the most significant new developments facing businesses this year are the Secretary of Labor’s revisions to the Fair Labor Standard Act’s (FLSA’s) current “white collar” exemption standards.  In June of 2015, the U.S. Department of Labor (“DOL”) announced its anticipated proposed revisions to the FLSA’s overtime exemption regulations, which would make it harder for employers to classify employees as exempt from overtime pay. 

According to the DOL’s calculations, under the proposed rule, nearly four million workers, who are currently exempt, will become entitled to minimum wage and overtime protection under the FLSA.  The proposed rules could be published as early as this month. 

Currently, the FLSA requires employers to pay employees minimum wage and overtime pay (one and a half times the employee’s regular rate for hours in excess of forty hours a week) but also provides a number of exemptions from these requirements. 

Specifically, pursuant to “white collar” exemptions, employees who are currently paid at least $23,600 per year on a salary basis and whose primary duties consist of certain executive, administrative, and/or professional duties, are exempt from minimum wage and overtime requirements.  Under the new proposal, however, the DOL would increase employee minimum wage and overtime eligibility to employees by raising the eligibility exemption cap to $47,000 annually.  This $47,000 figure is slightly below the $50,440 threshold the DOL proposed in June of 2015, but still twice the current level.

Further, although the current regulations allow for some subjectivity and interpretation of an exempt employee’s “primary duties,” the new proposal adopts a standard that reflects California’s overtime law, which requires an exempt manager to spend at least 50% of his or her time performing primary managerial duties. A previously exempt manager, for example, who spends more than 50% of his or her time completing lower level assignments, could be found to be non-exempt under the new overtime pay proposals.

Additionally, the proposed law would raise the threshold salary for the “highly compensated employee” exemption from $100,000 to (what the DOL estimates as) $122,148 per year. 

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