Employment Law: More Employees to Become Eligible for Overtime Pay?

The Executive Branch has Big Plans for the Fair Labor Standards Act

By:  Jonathan K. Driggs, Attorney at Law

When I was a kid, David Bowie sang about ch-ch-changes.   Well, there is an important change looming off in the distance, one with a potentially meaningful financial impact for employers.  With the US Congress tied up in political knots, you’d think there wouldn’t be much activity to report on the federal level when it comes to employment law.  However, there is a lot of activity going on but it is not coming from the legislative branch of the government.  Rather, it’s coming from the executive branch (i.e., President Obama and the government enforcement agencies he oversees).

 

There is a reason for this: with Congress in gridlock, the executive branch is attempting to move forward it’s stymied legislative agenda by using the authority it has over government agencies.  There is nothing unusual about this—both parties do it to some degree when they are in power—but it is probably fair to say that President Obama is more aggressive about using his authority in this way than most of his predecessors.

As an attorney who represents and advises employers, my concern is that many business leaders are less aware of what is happening on the regulatory (executive) level than they are on the legislative level.  As a result, important changes can be made to existing employment laws without as much awareness from the employer community.

 

Case in point: on March 13, 2014, President Obama issued an important Executive Order (EO) directing the US Department of Labor (DOL) to review its regulations regarding which employees may be treated as exempt from overtime pay under the Fair Labor Standards Act (FLSA).  The FLSA is our main federal wage and hour law and it has been around for a very long time (since 1938).   It sets standards for minimum wage and overtime pay (including exemptions from overtime pay).  The DOL has the authority to enforce the FLSA and to issue regulations interpreting the finer points of the law—including setting many of the specific requirements for the oft-used “white collar” exemptions (i.e., executive, administrative and professional exemptions).  These regulations have a major impact on how the law is interpreted.

 

President Obama’s specific charge to the DOL is to revise the regulations so that more employees will be eligible to receive overtime pay.  Once finalized, it will cost more to employ certain types of employees.  While it is still unclear exactly what changes will be made, at least two things are likely to happen:

Job duty requirements for exemption status will become more strict.  Examples could include additional requirements on what type of work does and does not qualify as supervisorial, thus narrowing the executive exemption.  It is also possible that requirements may be imposed about the amount of exempt level work an employee must perform each week to qualify for the exemption (e.g., at least 20 hours or 50% of work time).  It is clear that one of the intentions behind President Obama’s EO is to establish once and for all that many of the low level supervisors found in the restaurant (fast food in particular) and retail industries must be treated as non-exempt.  In other words, they’re targeting the more “borderline” professional-level employees.

 

  1. The minimum salary requirement for exempt status will be raised.  In order to be exempt under the white collar exemptions, employees must currently receive a weekly salary of at least $455.  A very easy way to limit the use of white collar exemptions is to raise the weekly salary requirement.  Probably the only real question is how high the DOL will try to raise it.  There are all sorts of rumors circulating, but we simply won’t know until the new regulations are finalized.  While such changes are well-intentioned, the increased cost of labor will result in fewer employment opportunities being available (the more expensive you make employment, the fewer employment opportunities there will be).

 

So, now that the EO has been issued, where do we go from here?  The DOL will issue proposed regulations and then give the public time to comment (and yes, your comments are important!)  The DOL will then review the comments, make the changes they want to make, and then seek approval of the final regulations through the Office of Management and Budget.  While lots of things could happen in the meantime, I don’t suspect the process will be derailed.  The estimates are that it will take 12 to 18 months to go through the rule-making process.

 

To be clear, I am not automatically opposed to making changes to the FLSA.  However, as we make more lower-level employees non-exempt, I wish we could update the FLSA to bring it into the 21st Century to more accurately reflect the realities of our modern workplaces (e.g., there are some genuinely professional-level workers who cannot be treated as exempt because the law didn’t comprehend their existence when it was written 75 years ago).  Nevertheless, employers should stay tuned for some important ch-ch-changes coming down the road that could have a meaningful fiscal impact.

 

This article should not be construed as legal advice.  Copyright ©2014 by Jonathan K. Driggs, Attorney at Law, P.C.  All rights reserved.  Jonathan K. Driggs is an employment law attorney with over 21 years of experience, including 3 years with the Utah Labor Commission.  www.jkdlawpc.com

 

Call an HR Attorney as often as you need, for a low, fixed monthly fee!  In partnership with Payroll Experts, Jonathan is offering his “HR Legal Compliance Service” to Payroll Experts clients at discounted rates.  For a low, fixed monthly fee, you can call Jonathan as often as you need to get answers to your HR legal compliance and employee relations questions.  Get rid of the attorney’s ticking clock!  For more information, please contact Payroll Experts at (801) 221-3732 and ask about the “HR Legal Compliance Service.”

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