President Obama signed a memorandum on March 13, 2014, instructing the Department of Labor to update regulations about who qualifies for overtime pay under the Fair Labor Standards Act (“FLSA). The FLSA provides that employees are entitled to be paid a minimum wage for all hours worked, as well as overtime pay for working in excess of 40 hours in a workweek. However, the FLSA contains exemptions for certain types of employees, such as professional, administrative, and executive employees (“White-collar exemptions”). Employee’s who are exempt under one or more of these exemptions are not entitled to minimum wage or overtime, provided they are paid a weekly salary of at least $455 ($23,660 annually) and perform certain prescribed duties.
Obama is looking specifically at the White-collar exemptions, including the salary level and duty requirements. Obama wants to raise the salary threshold from $455, but has not indicated just how high he thinks it should be raised, noting “it has been raised only twice in the past 40 years.” The President’s memorandum also suggests that the primary duties of the White-collar exemptions do not truly fit in the executive, administrative, and professional employee’s exemptions. In a fact sheet on the President’s memorandum, the White House said: “Millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or fast food shift manager or office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay.”
Many experts say if the White-collar exemptions are limited, employers will have to either increase worker’s salaries to comply, or re-classify them as non-exempt and pay them overtime. Employers could also hire more employees, but the other two options are most likely to be implemented. Furthermore, once the new regulations are implemented, which is not likely for several months, employers will have to audit their pay classifications to ensure compliance.