By Brian Boreman
The Obama Administration has directed the U.S. Department of Labor (“DOL”) to revise its “white collar” exemptions under the Fair Labor Standards Act (“FLSA”). The FLSA, which was first enacted in 1938, is a federal statute that requires employers, regardless of size, to compensate its employees at a rate equal to one and one-half times their regular rate of pay for all hours worked in excess of forty hours in a workweek.
Certain executive, administrative and professional employees are exempt from the overtime pay obligations of the FLSA provided they, among other things, earn more than $23,600 per year. In response to the executive memorandum issued by President Obama, the DOL has proposed to more than double the minimum salary threshold for white-collar employees to $50,440 per year.
Before making a final determination, the DOL provided a sixty-day period for public comment on its proposal.
To say the DOL was inundated with responses is an understatement, as it is now in the process of reviewing over 250,000 comments it received, both for and against the proposed revisions.
While it is impossible to predict exactly what increase will be made to the minimum salary threshold and when the increase will go into effect, the number of white collar employees who will be eligible for overtime pay is expected to jump dramatically.
In certain situations, an employer may choose to increase an employee’s salary above the new minimum threshold to avoid paying overtime wages to an employee.
While this tactic may work in limited circumstances, salary adjustments across the board will be impractical for all employees affected by the new regulations. As such, businesses, both small and large, will need to make thoughtful and significant adjustments in their workforce and business operations to comply with the FLSA.
Failure to do so will have grave economic consequences.
Brian Boreman is a partner with the law firm of Unruh, Turner, Burke & Frees in West Chester. He can be contacted at 610-692-1371 or via email at Bboreman@utbf.com.