Thursday, May 21, 2015


On May 5, 2015, the U.S. Department of Labor submitted proposed new “white collar” overtime exemption regulations to the federal Office of Management and Budget for approval.  These regulations were produced in response to a March, 2014 order from the President to revise overtime exemption regulations in order to make more workers eligible for overtime pay.  While the proposed regulations have not been made public, it is certain that they will include a significant increase in the weekly salary that a worker must receive in order to qualify for a white collar (executive, administrative, professional) exemption from the overtime provisions of the Fair Labor Standards Act (FLSA).

The current salary minimum, last revised in 2004, is $455 per week, or $23,660 per year. Speculation as to possible new salary thresholds has suggested figures of $42,000, $51,000, and $69,000 per year, the last having been the figure recommended in a letter to Secretary of Labor Perez by 30 Congressional Democrats, allegedly to restore the percentage of workers entitled to overtime pay to the 65% of workers that were considered non-exempt in 1975.  

To put these threshold numbers in context, the all-occupations mean salary in the U.S. in May of 2014 was $47,230, according to the U.S. Bureau of Labor Statistics (BLS).  Of the 10 largest occupations in the United States, only registered nurses, with an annual mean salary of $69,790, had an average wage above the all-occupations mean.  If a $69,000 threshold for exempt status were adopted, therefore, roughly half of the more than 2.5 million U.S. registered nurses would not qualify for FLSA exempt status.  Some other annual mean salaries of note are the following:  first line production supervisors -- $59,060; supervisors of office and administrative support workers -- $54,400; executive secretaries and executive administrative assistants -- $53,590; first-line supervisors of correctional officers -- $61,790; supervisors of personal care and service workers -- $39,560; supervisors of building and grounds cleaning and maintenance workers -- $41,700; supervisors of sales workers -- $49,370.   

Other changes also are expected, especially with respect to the current “primary duty” test.  An employee who is paid a salary that meets the current minimum salary threshold and whose “primary duty” is executive, administrative, or professional may qualify for exempt status even though, in some cases, the employee spends more than 50% of his time doing non-exempt work.  That is expected to change, with the new regulations specifying that, to be considered to be exempt from overtime, an employee must spend more than 50% of his time doing exempt-level work.  In addition, the restrictions on the performance of non-exempt work by otherwise exempt employees are likely to be tightened.  

Once the new regulations come out – which could be anywhere from weeks to months -- it will be important for employers to conduct FLSA audits to determine compliance with the new standards. Not only will the Department of Labor be charged with enforcing the new regulations, but the number of lawsuits testing compliance with the FLSA (and State law based on expected new State regulations to follow) is likely to increase substantially.