The Details
The “white collar exceptions” found in Section 13 (a)(1) of the FLSA provide an exemption from overtime pay for those employed as bona fide executive, administrative, professional and outside sales employees. To qualify, these employees must be paid at least $455.00 a week on a salary basis, and their job duties must meet specific tests, such as, including managerial or supervisory responsibility or requiring advanced knowledge or independent judgment. Many believe that changes to the law will involve an increase the “salary basis” from $455/week, and will also include amendments to the “duties test.”
According to President Obama, the “low salary threshold” of the white collar exemptions means that today, “millions of Americans aren't getting the extra pay they deserve” because “an exception that was originally meant for high paid white collar employees now covers workers earning as little as 23,660 a year.”
Practical Impact
If a regulation is implemented, employers in some industries may be impacted more than others. For example, fast food, service and retail industries, where there are a number of low level supervisory positions, are likely to be impacted immediately. The technology industry should also take note. Employers in all industries should expect to audit their employee classification systems, to ensure they are compliant. In addition to the obvious financial impact having to pay previously exempt employees working 60 hours a week, overtime - employers may see an administrative impact as well. For example, employers may need to begin scheduling breaks for newly non-exempt employees, and paying them for their time.
The anticipated changes will follow the normal rulemaking process. First, the Department of Labor (DOL) will propose a rule and give the public an opportunity to comment. The DOL will then consider making revisions based on those comments, await clearance of the rule by the White House Office of Management and Budget (OMB), and then issue the final rule. Some anticipate that the rulemaking process could take anywhere from a year to 18 months.
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