Coming on the heels of President Obama’s recent order to the U.S. Department of Labor to revise the “white collar” overtime exemptions under the Fair Labor Standards Act (“FLSA”), Democrats in the U.S. Senate this week introduced a bill that would amend the FLSA to potentially achieve the same result.
The bill, entitled the Restoring Overtime Pay for Working Americans Act, would make it more difficult for employers to classify workers as exempt under the FLSA’s executive, administrative, professional, outside sales, and computer exemptions.
According to the lawmakers’ press release, the proposal would boost overtime protections by guaranteeing coverage to approximately 47 percent of salaried workers nationwide. Currently, 12 percent of salaried workers are guaranteed overtime pay based on their salaries.
While the proposed legislation is given virtually no chance of passing the Senate, it does reflect the administration’s continued effort to narrow the white collar exemptions and may provide insight into what the DOL’s forthcoming revisions might look like.
As we previously reported, the President’s executive order in March directed the agency to “modernize and streamline the existing overtime regulations.” The President’s memorandum provided few details on what the overhaul would entail, but made clear the administration’s position that the FLSA’s executive, administrative and professional exemptions have not kept up with the modern economy, and that because of that, millions of workers lack overtime protections.
An accompanying Fact Sheet that the White House released at the time specifically highlighted the weekly pay threshold an employee must meet to qualify for the white collar exemptions, noting that the DOL set the threshold at $250 in 1975 and raised it to $455 in 2004.
Commentators had predicted that the new regulations could increase that salary level to as high as $1,000 per week (or about $52,000 per year). There also had been speculation that the new rules would establish a minimum amount of managerial duties that a worker would have to carry out in order to be exempt under the executive exemption. As the regulations currently stand, employees need not necessarily spend more than 50 percent of their time performing managerial functions in order to qualify for the exemption.
Based on the proposed legislation, the conjecture appears to be well-founded. While the details of the DOL’s regulatory revamp have not been made public, the Senate’s legislation likely reflects the agency’s priorities.
Key provisions of the proposal include:
- Raising the overtime salary threshold for executive, administrative and professional to $1,090. The new threshold would be phased in over several years and indexed to inflation after that.
- Raising the threshold for “highly compensated employees” from $100,000 to $125,000, and indexing it to inflation after that.
- Creating a “common sense” definition of the term “primary duty.” This term is used in regulations to determine if a worker’s duties are eligible to be overtime exempt. Prior to 2004, a primary duty was that which was performed the majority of the time. Regulations issued in 2004 removed that 50 percent threshold, allowing a worker to be exempt even if he or she only spends a few hours a week supervising or doing other exempt duties. This bill would restore a 50% threshold.
- Establishing recordkeeping penalties. The penalties would be the same as for violations of minimum wage or overtime: up to $1,100 if the violation is willful or repeated.
We will continue to monitor this story as it develops.