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Insight Potential Changes Coming to the White-Collar Overtime Exemptions

The Fair Labor Standards Act (FLSA) requires employers to pay overtime to workers who work more than 40 hours in a week. However, this overtime requirement does not apply to employees who are exempt. A common group of exemptions are the so-called white-collar exemptions, which generally apply to executive, administrative, and professional employees who are paid a salary of at least $455 per week ($23,660 per year).

On March 13, 2014, President Obama sent a Presidential Memorandum to the Secretary of Labor, claiming that the white-collar exemptions “have not kept up with our modern economy” and that, “[b]ecause these regulations are outdated, millions of Americans lack the protections of overtime.” The Memorandum then directed the Secretary to “propose revisions to modernize and streamline the existing overtime regulations.”

While the Memorandum does not dictate what changes should be made to the regulations, President Obama’s remarks when he signed the Memorandum (along with a Fact Sheet issued by the White House) give some insight into the changes that will likely be made:

“Unfortunately, today, millions of Americans aren’t getting the extra pay they deserve. That’s because an exception that was originally meant for high-paid, white-collar employees now covers workers earning as little as $23,660 a year. So if you’re making $23,000, typically, you’re not high in management. If your salary is even a dollar above the current threshold, you may not be guaranteed overtime. It doesn’t matter if what you do is mostly physical work like stocking shelves, it doesn’t matter if you’re working 50 or 60 or 70 hours a week — your employer doesn’t have to pay you a single extra dime.”

Thus, two major changes to the FLSA regulations are anticipated. First, the minimum amount at which the white-collar exemptions may apply will likely be increased well above the current $455 per week. The New York Times reports that this threshold amount may be “significantly increase[d],” perhaps moving as high as $900+ per week ($46,800+ per year). Second, in order for a white-collar exemption to apply in the future, an employee may be required to perform exempt duties at least some minimum percentage of the time. Currently, a white-collar exemption may apply because an employee’s “primary duty” is of an exempt nature, even if he or she performs that exempt duty less than half of his or her working time.

Both of these expected changes would decrease the scope of the white-collar exemptions and could substantially increase the number of employees qualifying for the FLSA’s overtime protections.

It will likely take several months before any regulations are proposed and then finalized by the Department of Labor. In the meantime, if you have any questions regarding the FLSA or other employment matters, please contact a member of our employment group or call 208.344.6000.

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