White Collar Overtime Exemption Overhaul May Include Big Increase in Minimum Salary Requirements
- February 13, 2015
Last year, President Obama directed the Department of Labor to review and update its so-called “white collar” overtime and minimum wage exemption regulations. The rules apply to executive, administrative and professional occupations, as well as outside salespersons and computer professionals. In order to claim most of the exemptions, employees must be paid on a salary basis.
The current minimum salary is $455 per week, or roughly $23,000 per year. This salary level has not changed for years, and is not currently linked to inflation. In recent weeks, a number of advocates have urged DOL to make a dramatic increase in this minimum a key component of the exemption overhaul. A group of labor economists proposed a minimum annual salary of $50,000 for exempt employees. Earlier this month, 26 Democratic senators wrote a letter to DOL calling for a minimum salary of $56,000.
Either proposal would eliminate use of the overtime exemption for a wide swath of currently exempt employees. For example, many assistant managers in the retail and hospitality industries are paid well below this level. Under these proposals, many lower level administrative employees in service and manufacturing businesses would also fall below this minimum salary threshold. If the increase is tied to the general inflation rate, the salary level would not effectively diminish over time, as has been the case in the past.
These proposals may indicate an unwillingness on the part of DOL to dramatically reduce the availability of the most commonly used overtime exemptions. If tied to further restrictions on eligible duties for exempt employees, these changes could further increase the number of workers entitled to overtime for hours worked over 40 in any workweek. DOL is expected to release its proposed changes to the white collar exemptions later this year.