Facebook, Twitter, LinkedIn, YouTube, RSS, EmailFacebookTwitterLinkedInYoutubeRSS News FeedEmail


Millions of White Collar Employees Could Lose FLSA Overtime Exemption

by Martin Salcedo, Esq. - The Human Equation on 8/18/2015
Facebook, Twitter, LinkedIn, Google+, YouTube, RSS Facebook Twitter Linkedin Google+ YouTube RSS

In March 2014, President Obama directed the Secretary of Labor to “modernize and streamline” the Fair Labor Standards Act’s overtime exemption regulations governing executive, administrative and professional employees. On July 6, 2015, the Department of Labor (DOL) published its proposed regulatory changes to these so-called ‘white collar’ overtime exemptions, and despite their significance, they are quite simple.

The DOL essentially proposed three general changes to the white collar overtime exemptions.

1.  Increase the Minimum Salary Requirement

The DOL proposed increasing the minimum salary requirement for the three white collar exemptions from $455 per week ($23,660 annually) to $921 per week ($47,892 annually), which is currently the 40th percentile of earnings for full-time salaried workers. Though each white collar exemption has unique ‘primary duties’ requirements, all three share the same minimum weekly salary requirement. Simply changing this number affects the scope and applicability of all three exemptions.

The effect of this change can be gauged by making a list of every employee who 1) currently qualifies for a white collar overtime exemption, and 2) earns more than $455 but less than $921 per week. Under the proposed regulations, every employee on the list could be entitled to overtime compensation. According to the DOL’s own estimates, during the first year under the new regulations, 4.6 million currently exempt workers would be entitled to overtime compensation “without some intervening action by their employers.”

2.  Increase the Minimum Salary for Highly Compensated Employees

Certain highly compensated employees (HCEs) are exempt from the FLSA. The DOL proposed increasing the minimum annual compensation level for the HCE exemption from $100,000 to $122,148, which is currently the 90th percentile of earnings for full-time salaried workers.

3.  Update Salary and Compensation Levels Annually

The DOL proposed establishing a mechanism to automatically update minimum salary and compensation levels annually so they will remain a useful and effective test for exempt status. The DOL proposed using either a fixed percentile of wages or the Consumer Price Index for All Urban Consumers (CPI-U).

According to the DOL, these proposed changes preserve the FLSA’s intended overtime protections, and simplify the identification of nonexempt employees, which should make it easier to understand and apply the executive, administrative and professional employee overtime exemptions.

Though the DOL did not propose any changes to the standard duties tests that must be satisfied under the current regulations, it is seeking comments on whether these tests are working as intended. The DOL is concerned that in some instances employees performing a disproportionate amount of nonexempt work are still being classified as exempt.

The deadline to submit comments about the DOL’s proposed regulations is September 4, 2015.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.

Tags: , , , , ,
Categories: 2015, Human Resources


5/19/2016 2:01:21 PM #

New White Collar FLSA Overtime Rules Are Here! Will You Be Ready By The Effective Date?

New White Collar FLSA Overtime Rules Are Here! Will You Be Ready By The Effective Date?

The Human Equation News | Reply

Add comment

  • Comment
  • Preview

  privacy policy
The Human Equation's newsletters and publications are intended as an information source for the clients and friends of the firm. Their content should not be construed as legal advice, and readers should not act upon the information in these publications without professional guidance. Please note that newsletters and publications that are archived by The Human Equation are not updated after initial publication and may not contain the most current information available.

Refer to friendRefer to friend

Permission to ReprintPermission to Reprint

Contact a Subject Matter ExpertContact an Expert

Subscribe to Our NewsletterSubscribe to Our Newsletter


© 2022 - The Human Equation, Inc. All rights reserved. - Privacy Policy - Disclaimer -
Follow us on Facebook.comFollow us on Twitter.comFollow us on Linkedin.comFollow us on YouTube.comSubscribe to our RSS FeedSend us an email
Subscribe to our newsletter
900 South Pine Island Road, Suite 300 - Plantation, FL 33324 - Phone: 800-521-9667 / 954-382-0030 - Fax: 954-382-2810