The Department of Labor has hinted in two recent blog posts (here and here) that its proposed revisions to the white-collar exemption regulations will be released very soon. While the DOL has been tight lipped about its proposed changes since President Obama called for them, we anticipate changes to both the salary basis level and the duties tests.

While there will be much discussion about these proposed changes throughout the notice and comment period, it is important to keep a couple things in mind. First, the overtime provisions in the Fair Labor Standards Act are rooted in depression era jobs creation. By requiring overtime compensation to employees who work more than forty hours, the Act incentivizes employers to hire new employees rather than forcing their current workers to carry the excess burden by working more hours.

Second, the salary basis requirement – currently set at $455 a week – is meant to be an indication of high-level compensation equating to a high-level white collar worker who should not receive overtime compensation. The DOL has explained the white collar exemptions were “intended for well-compensated white-collar employees: doctors, lawyers, CEOs.” However, because the salary basis level has been updated once since 1975, a salary basis of $455 a week is no longer an indication of a well-compensated white-collar employee. Where is currently sits, the salary basis equates to an annual salary of $23,660. Paying an employee a salary of $455 a week is simply no longer an indication that the employee is of the doctor, lawyer, CEO type. We anticipate a substantial increase in the salary basis level, along with potentially pinning it to the rate of inflation to ensure that it remains a true indication of white-collar work.

Stay tuned – the DOL should be issuing their proposed revisions to the regulations in the very near future.

Larry Johnson
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