Mar 21, 2014

President Obama to Secretary of Labor: Streamline the FLSA’s White-Collar Overtime Exemption

On March 13, 2014, President Obama issued a memorandum to the Secretary of Labor requiring that the regulations to the Fair Labor Standards Act (“FLSA”) be revised in an attempt to “modernize and streamline the existing overtime regulations.”  The FLSA requires employers to pay most employees at a rate of time-and-a-half their regular rate of pay for any hours worked in excess of 40 during the workweek.  However, there are exemptions for those employed in a bona fide executive, administrative, professional, or outside sales capacity. To qualify for the exemption, currently, an employee must be paid at least $455 per week and his or her job responsibilities must meet certain criteria.

The Obama Administration contends that the current overtime regulations are outdated because they were designed to cover “high-paid, white-collar” employees, but now apply to workers earning as little as $23,660 per year. Changes to employee classifications regarding the types of duties considered supervisory or to requirements that workers devote a specific amount of their time on the job to certain duties to qualify for the exemption are also likely.  Questions over employee duties can be highly fact-specific and are regularly the subject of litigation.  This directive comes on the heels of the President’s executive order requiring federal contractors to pay their employees at least $10.10 per hour on all new federal contracts.

However, the initiative to update the exemption may take some time. The Department of Labor must formally propose a rule, provide the public an opportunity to comment, make any necessary revisions, and await clearance of the rule by the White House Office of Management and Budget.  The effective date for any revisions will probably occur in 2015 or later.

While the projected impact on employers is still not certain, employers can have an impact on the final regulations by making comments regarding it either directly or through a trade association.  Our Labor and Employment Counsel will provide updates on the process.

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