Department of Labor Works Overtime to Draft New Exemption Rules

It looks like President Barack Obama would like to add overtime reform to his growing list of second-term accomplishments.  Last week, in response to a March 2014 memorandum issued by the President, the Wage & Hour Division of the U.S. Department of Labor (“DOL”) made public a proposal that would broaden federal overtime pay regulations to include millions of additional workers and make it more difficult for employers to classify employees as exempt under the Fair Labor Standards Act’s “white collar” overtime exemption (29 CFR Part 541).

As the regulations stand now, employees are generally exempt from overtime pay if they perform certain types of work (i.e., executive, administrative, professional, outside sales, and/or IT) and receive a minimum annual salary of $23,660.  Under the proposed rule, this salary floor would more than double in 2016—to $50,440—and be indexed to inflation on an annual basis.  The current salary threshold was last updated in 2004.  

The proposal is expected to be published in the Federal Register this week, which will be followed by a 60-day comment period.  The DOL is specifically seeking input as to whether changes should be made to any of the job duty tests, and suggests the possibility of adopting the California rule (where a worker has to spend at least 50 percent of their time on exempt duties in order to be exempt from overtime) as the new federal standard.