President Obama recently signed a memorandum instructing the Department of Labor (DOL) to revise the regulations governing "white-collar exemptions" under the Fair Labor Standards Act (FLSA), which exempt certain employees from overtime requirements. The Administration's stated goal is to make more workers eligible for overtime and minimum wage by overhauling the existing regulations. However, others believe the President's initiative is motivated by his endeavors to increase the minimum wage by expanding the number of workers who are entitled to receive minimum wage and overtime pay.
Currently, the FLSA requires employers to pay nonexempt employees overtime at time and one-half their regular pay rate for any time worked over 40 hours in a workweek (or, for public employers, to provide compensatory time in lieu of overtime pay). But, the FLSA provides for "white-collar" exemptions, which generally apply to certain executive, administrative, professional, computer and outside sales employees. To qualify for the "white-collar" exemptions, employees generally must be paid at least $455 per week (or $23,660 per year) on a salary basis and meet the appropriate job-duties requirement tests. Such duties are normally limited to employees who perform relatively high-level work, such as managing a part of the business and supervising other employees, among many other duties. Job titles have no significance in determining whether employees are exempt from the overtime requirement. By meeting such requirements for a white-collar exemption, an employee will be exempt from receiving minimum wage and overtime pay.
In an effort to limit the exemption, President Obama likely wants the DOL to raise the minimum salary requirement and further narrow the existing job-duties requirement tests. As a result, the revisions may lead to substantial changes which may require employees currently classified as exempt to be reclassified as nonexempt, making them eligible for overtime and minimum wage. The new regulations are unlikely to take effect in 2014, and could possibly even take years to implement. During this time, businesses and employers should prepare for the anticipated changes by reviewing existing classifications for potential problems.