On Monday, July 6, the United States Department of Labor (USDOL) published its long awaited proposed rule “updating” regulations “defining and delimiting” the exemptions from overtime for white collar employees (i.e., the executive, administrative and professional exemptions). As you will recall, on March 13, 2014, President Obama signed a Presidential Memorandum directing the Department of Labor to update the regulations defining which white collar workers are eligible to receive overtime pay for hours worked over 40 in the workweek under the Fair Labor Standards Act (FLSA). The Presidential Memorandum was part of the President’s initiative to address income inequality and included efforts to raise the hourly minimum wage as well. The Department conducted a number of stakeholders meetings around the country seeking information, and the proposed regulations have taken much longer to draft than expected. In any case, the Department believes that if these regulations are finalized, an additional five million workers will be entitled to overtime under the FLSA.

By way of background, in order qualify for one of the white collar exemptions, the FLSA currently requires that an employee be paid at least $455 per week ($23,660 per year) as well as meet a number of other tests. This threshold was created in 2004, the last time these regulations were updated. The Department is now proposing that the weekly salary be raised, pursuant to a formula to about $970 per week or $50,000 per year in 2016 when the regulations would be effective. The $970 figure is the expected salary level at the 40th percentile of weekly earnings for full-time salaried workers in 2016. The proposal actually sets the standard at the 40th percentile of weekly earnings and thus the actual salary level will be automatically updated each year to keep it at this 40th percentile level.