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On June 30, 2015, The U.S. Department of Labor (“DOL”) Wage and Hour Division issued proposed regulations which, if adopted, could significantly increase the number of individuals who are eligible for overtime pay.  The DOL’s proposed changes are in response to President Obama’s March 2014 Presidential Memorandum directing the DOL to simplify the overtime regulations and make overtime available to more employees. The DOL estimates that 4.6 million workers who are now classified as exempt under the current regulations will become overtime-eligible under the proposed regulations without some intervening action by their employers.

Background of FLSA Overtime Rules
The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hour worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 in a workweek.  The FLSA, however, provides an exemption from both minimum wage and overtime pay for employees employed as bonafide executive, administrative, professional and outside sales employees, and certain computer employees. These are commonly referred to as “white collar” exemptions.

Generally, to qualify for these exemptions, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. In addition, current DOL regulations contain a special exemption for “highly-compensated” workers who are paid total annual compensation of $100,000 or more.

In 2004, the DOL modified the job duties rules for the white collar exemptions.  The proposed regulations, at this point, seek to modify only the salary requirement of the various exemptions.

Highlights of Proposed Rule Changes
The proposed rules would increase the salary threshold from $455 a week (or $23,660 per year) to $970 a week (or $50,440 per year) in 2016. Additionally, highly compensated employees would see the salary threshold rise to $122,148. The DOL’s proposed minimum exempt salary threshold represents the fortieth (40th) percentile of full-time salaried employees’ salaries.  Additionally, the DOL proposes to adjust (and likely increase) these minimum salary and compensation levels on an annual basis.

While the proposed rules do not expressly seek to revise the various duties tests necessary to be considered exempt, the DOL nevertheless seeks comments on whether, in light of its compensation proposals, changes to the duties test are necessary.  More specifically, the DOL is soliciting comments on the following issues: