Hold on to Your Collars: Overtime Changes to White Collar Exemptions are Coming under the Fair Labor Standards Act

By: Nicole Cheuk. This was posted Wednesday, July 1st, 2015

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On June 30, 2015, the United States Department of Labor issued the long-anticipated Proposed Rulemaking to update the regulations governing which “white collar workers”— executive, administrative, and professional employees — are entitled to minimum wage and overtime pay pursuant to the Fair Labor Standards Act. If implemented as proposed, early estimates indicate that over 5 million employees could become eligible for overtime and minimum wage protections.

Currently the salary threshold stands at $455/week or $23,660 annually, meaning that those white collar employees making more than $23,660 in annual salary are eligible for exemption under the FLSA and may not be entitled to overtime pay or minimum wage if they also perform certain duties that are required to qualify for the exemption. The current threshold has not been updated since 2004, and updating that figure is the main focus of the proposed rule.

The main provisions of the Proposed Rule include:

  1. An increase of the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($970 per week or $50,440 annually for 2016);
  2. An increase to the total annual compensation requirement needed to exempt highly compensated employees to the value of the 90th percentile of weekly earnings for full-time salaried workers ($122,148 annually for 2013).
  3. The creation of an automatic mechanism to adjust the levels in the future.

The Department of Labor seeks comments related to the Proposed Rulemaking through its website: http://www.dol.gov/whd/overtime/NPRM2015/. Further, a detailed fact sheet on the Proposed Rulemaking can be found at: http://www.dol.gov/whd/overtime/NPRM2015/factsheet.htm.

While these rules are merely proposals, they forecast a significant change to overtime and minimum wage requirements. Employers should use this time to evaluate its employees who might be affected by the proposed rules, if made law.

The Employment Team at Sands Anderson will be tracking the Proposed Rulemaking as it works though the administrative regulation process. For assistance with your employment questions, please feel free to contact us.

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