President Obama Directs Labor Department to Update Exemption Regulations

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Published Date: 03/24/2014


John; Gupton

By John Gupton


President Obama recently signed a presidential memorandum instructing the Secretary of Labor to update regulations regarding overtime protections and the exemption regulations. The President’s directive (if enacted) would lead to the changing of employers’ wage and hour obligations as spelled out in the Fair Labor Standards Act (FLSA) to make overtime compensation available to a wider group of employees who are currently considered “exempt” from the federal law’s overtime requirements.


The overtime and minimum wage rules are set in the FLSA, originally passed by Congress in 1938, and apply broadly to workers. However, there are some exemptions to these rules that the US Department of Labor (DOL) has the authority to define through regulation. The most commonly used exemptions are for executive, administrative and professional employees – the so-called “white collar” exemptions.


In general, workers who are paid hourly wages or who earn below a certain salary threshold are generally protected by overtime regulations, while those above the salary threshold who perform executive, professional or administrative duties are not.


The new rules (if enacted) are expected to extend the availability of overtime compensation for hours worked over 40 in a workweek to managers working at fast-food restaurants, loan officers, and other workers who are currently classified as “executive” (managerial). The change, if implemented, could affect millions of workers.


President Obama is focusing on the salary basis test for the DOL exemption regulations. Currently the minimum salary requirement is $455 per week (which was set in 2004). His position is that inflation has eroded this salary requirement. In 1975, the DOL set the minimum salary requirement at $250 per week.


However, changes to the DOL regulations will have to go through the notice and comment period required under the Administrative Procedures Act. The administration has acknowledged that this process will take months (perhaps years) and will involve much work to get the changes enacted.


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