Proposed DOL Rule To Make More White Collar Employees Eligible For Overtime Pay

More than a year after its efforts were first announced, the U.S. Department of Labor (“DOL”) has finally announced its proposed new rule pertaining to overtime. And that rule, if implemented, will result in a great many “white collar” employees previously treated as exempt becoming eligible for overtime pay for work performed beyond 40 hours in a workweek – or receiving salary increases in order that their exempt status will continue.

In 2014, President Obama directed the DOL to enhance the “white collar” exemptions to the Fair Labor Standards Act (“FLSA”), which currently exempt from overtime some employees who earn $455 per week, or $23,660 per year.  The DOL’s proposed rule would more than double the salary threshold for an executive, administrative or professional exemption to apply, increasing it to $970 per week, or $50,440 per year.  In addition, the highly compensated employee exemption would increase from $100,000 to $122,148.  Not unimportantly, pursuant to the proposed rule, These salary figures would automatically adjust for annual inflation.  

Somewhat surprisingly, the proposed rule does not propose any enhancements to the duties requirements for an employee to qualify for any of the “white collar” exemptions.  The proposed rule does, however, invite comments regarding the amount of time employees should be engaged in executive, administrative, or professional work to qualify for the exemption.  Under the current federal regulations, exempt work must constitute the employee's "primary duty."  That is a qualitative analysis, not a quantitative one.  By inviting comments on consideration of California's requirement that exempt duties be performed more than 50 percent of the time – a quantitative analysis – the DOL has suggested the possibility of another significant change to “white collar” exemptions.  As California employers know all too well, employees frequently file suit alleging they spend less than 50 percent of their time in exempt activities, challenging their employers to prove otherwise.  

The proposed rule likely will be published shortly in the Federal Register.  Upon publication, the proposed rule will be open to a 60-day comment period.  The DOL will review the comments, respond where appropriate and issue its final regulations.  The regulations will not be subject to Congressional approval.  It is important to note that when the “white collar” exemptions were last revised in 2004, the DOL received over 100,000 comments and spent nearly a full year responding to those comments before finalizing the regulations.