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UPDATE: Changes to FLSA Exemptions

03.17.14

As announced by the White House this week, President Obama directed the Department of Labor to update the regulations on the white-collar exemptions. Specifically, the President instructed the Secretary of Labor Thomas Perez to update the regulations. The President’s point was that the minimum salary requirements had only been raised once since 1975, and that was in 2004 when the minimum weekly salary was raised from $250 to $455. The directive did not provide any details on what changes would be made. However, the one page memo said that the regulations have not kept up with the modern economy and that millions of workers therefore lack overtime protections.

This memorandum specifically targets both the amount of compensation paid to the lowest level of exempt employees and the specifics of what constitutes an exempt employee. While no guidance has been provided as to what President Obama meant, the tone and tenure suggest a plan to further narrow the exemption, therefore, expanding the number of employees entitled to overtime. This agenda fits within the President’s plan to increase the minimum wage to $10.10 per hour in the private sector.

Any regulations promulgated by the DOL will have to be published for review and comment before they are implemented. Any expansion of workers who will no longer be considered exempt will likely be hotly contested by employers. Industries that will most likely be affected are retail and hospitality because they often employ managers and supervisors at the lowest levels of compensation.

Interestingly, one thing that both employee groups and employer groups have in common is the belief that the Fair Labor Standards Act has not kept up with the modern world. However, it is unlikely that any DOL proposed regulations will do much to aid employers in fitting that proverbial square peg in the round hole – when it comes to things like travel time, use of technology, etc.

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