On March 13, 2014, President Obama issued a Presidential Memorandum directing the Department of Labor (“DOL” or “the Department”) to begin overhauling its overtime regulations in a move that would likely require employers to begin paying overtime to millions of computer technicians, fast-food managers, loan officers, and others currently classified as exempt from the overtime requirements of the FLSA.
Presidential Memorandum
In his Presidential Memorandum, the President commented that the “white collar exemptions” (which include the executive, administrative, and professional exemptions) “have not kept up with our modern economy.” As a result, the President concludes that “millions of Americans lack the protections of overtime and even the right to minimum wage.”
Because of these deficiencies, the President directed the DOL to “modernize and streamline” the existing overtime regulations. The President requested that, in drafting the new regulations, the DOL should:
- “[U]pdate existing protections consistent with the intent of the Act”;
- “[A]ddress the changing nature of the workplace”; and
- “[S]implify the regulations to make them easier for both workers and businesses to understand and apply.”
Details of Changes Are Not Known
While the administration has failed to provide details of the changes that will be proposed, employers can anticipate significant changes to the white collar exemptions. According to the current regulations, bona fide executive, administrative, or professional employees need not be paid overtime if they are paid a salary of at least $455.00 per week. Many predict that President Obama’s desired regulations would likely increase that salary level, perhaps as high as $1,000 per week (or about $52,000 per year). This move coincides with the President’s stated desire to raise the federal minimum wage from $7.25 to $10.10 per hour.
In addition, with respect to the executive exemption, there is some 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 over 50% of their time performing managerial functions in order to qualify for the exemption.
Bottom Line
While the new regulations still need to be drafted (and then published for public comment before they can be implemented), employers should expect that the DOL will at some point issue proposed regulations that will likely further restrict employers’ ability to classify employees as exempt. It is impossible to predict when the regulations will be published, but it would not be unreasonable for the DOL to publish proposed regulations within the next 12 to 18 months.
We will continue to monitor this story as it develops.