Congress Begins Trying To Limit Federal White Collar Overtime Exemptions

By harley erbe

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In the wake of President Obama's Executive Order instructing the United States Department of Labor to "modernize and streamline" the agency’s "white collar" overtime exemption regulations, which cover overtime rights of executive, administrative, professional, outside sales, and computer employees under the Fair Labor Standards Act (FLSA), the U.S. Senate has drafted legislation that's intended to implement President's Obama's directive.  The Restoring Overtime Pay for Working Americans Act (S. 2486) would significantly increase the number of workers entitled to overtime compensation.

The legislation would increase the minimum salary thresholds for the executive, administrative, and professional employee exemptions.  Over a three-year period, the weekly compensation minimum would be increased from $455 per week to $1,090 per week.  After that point, the minimum salary requirements would be tied to inflation. The Senate's press release contends that the minimum salary level hasn't been properly set since 1975. 

Likewise, the proposed law would increase from $100,000 to $125,000 the minimum annual salary requirement for the "highly-compensated employees" exemption.  Under that exemption, a it's easier for employers to establish that well-paid employees are exempt and not entitled to overtime.  That minimum salary requirement would be increased over three years and would also be tied to inflation. The highly-compensated workers exemption has only existed since 2004 and its $100,000 minimum salary requirement has not been increased to reflect inflation since that time.

Of significant importance, the proposed law would alter the “primary duty” test that governs the question of whether an employee’s duties are covered by a white collar overtime exemption.  The "primary duties" is the main battleground in most overtime cases.  The new bill would restore the 50% threshold, i.e., that employees not spend more than 50% of their weekly work hours performing nonexempt duties. As the press release on the legislation noted, “regulations issued in 2004 removed that 50 percent threshold, creating a loophole that allowed a worker to be exempt even if he or she only spends a few hours a week supervising or doing other exempt duties.”  Under current Department of Labor regulations, a comparison of the amount of time an employee spends on exempt versus nonexempt work is important but is not necessarily determinative.  Depending upon the presence or absence of other factors, employees can spend less than 50% or their work week engaged in exempt work yet still be considered exempt.

So what does this mean?  Nothing much, probably.  The bill will have a hard time making it through the full Senate and has no chance of passage in the House.  But it might bring public attention, as a corollary to the minimum wage fight, to an area of real employer abuses in which employers bend over backwards to suppress labor costs by slapping an exemption label on as many employees as possible, even employees who make $30,000 a year and spend most of their time standing at a counter, helping customers and punching things into a cash register. 

This bill might also cause the Department of Labor to exercise its rulemaking power and start proposing new white collar regulations (last updated in 2004), in line with the President's directive, and update those regulations to reflect the current realities of the workplace.  The 2004 amendments, which eliminated the 50% primary duty threshold as discussed above, really messed things up.  According to the Senate's press release, "[t]oday, only 12 percent of salaried workers are guaranteed overtime pay based on their salaries, compared to 65 percent in 1975." 

The bill's sponsor, Senator Tom Harkin of Iowa, echoed the absurd state of affairs that is our current overtime pay system: "Every worker deserves a fair day’s pay for a hard day’s work, but because our overtime laws are out-of-date, Americans around the country who work long hours away from their families are denied a paycheck that reflects that work. That hurts their families and our economy.  Plain and simple, if you have to work more, you should be paid more.  Our legislation takes a commonsense approach to restoring overtime protections by making clear who should be eligible for overtime, while strengthening compliance provisions.  Americans who work hard and play by the rules should be fairly compensated for a hard day’s work."

Overtime cases require legal analysis of federal statutes, U.S. Department of Labor regulations, and court decisions.  I can help you with any employment law or labor law questions that you might have.  Please feel free to contact me if there's an employment law or labor law matter I can help you with.

By Harley Erbe

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