In his January 2014 State of the Union Address, President Obama described what he referred to as “wage stagnation” and told Congress that, if they did not act, he would take executive action designed to address the problem. Last March, President Obama directed the United States Department of Labor to revise the rules relating to the overtime exemptions for “executive, administrative and professional” employees – commonly referred to as the “white collar” exemptions. These changes will limit the exemption employers current claim from the overtime requirement in the Fair Labor Standards Act (“FLSA”). In other words, many employers who do not currently track hours and pay overtime for certain employees will need to begin doing both.
How will the current exemptions be changed? No one is certain: the White House originally stated that the proposed rules would be published in November 2014. Almost four months later, there is no indication they are any closer to completion. However, most think that at least two aspects of the current exemptions will change:
- Increased Minimum Salary: The current minimum salary required for executive, administrative and professional employees is $455.00 per week. That’s the equivalent of about $24,000.00 per year. The new rules will likely raise that minimum salary; some say to an equivalent of $50,000.00 per year or more. Some have suggested that the amendments will also require exempt employees be paid at least a minimum hourly rate for all hours worked.
- Change to the Duties Requirement: To qualify for the current FSLA exemptions, exempt employees’ must perform certain “duties”, but there is currently no minimum amount of time required performing exempt work so long as their “primary duty” falls within the exemption. Thus, the manager of a convenience store may be exempt from the FLSA’s overtime requirements even though he or she spends the vast majority of his or her time on non-exempt duties. It is anticipated that the new rules will require that a certain percentage of time be spent on exempt work in order to qualify for the exemption.
These changes are expected to significantly limit the availability to claim exemptions for a broad range of employees. If you are an employer who currently does not pay some or all employees overtime, you may be affected.
Despite the delay in specifics, employers can still prepare. Human Resources Employers can use the time to audit the basis for their current exemptions. For each employee the company claims is exempt, determine whether the company claims the employee meets the executive, administrative, or professional exemption; or whether they qualify for some other exemption. When the new rules are published, the Company will know immediately who may be affected.
Employers can also use this time to determine whether it makes financial sense to continue to claim the exemption for certain employees. If a currently exempt employee rarely works overtime, it might not make sense to pay the new, significantly higher minimum salary when paying overtime is cheaper.
The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including those relating to wage and hour compliance, for almost sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.