President Obama has announced that the DOL plans to address the “white collar” overtime exemption regulations and issue proposed rules soon. This could potentially affect the current overtime exemptions.
The last revision to this monetary amount required to be exempt occurred in 2004, when the rate was $250 a week. With the revisions that occurred in 2004 the rate almost doubled that $250 amount when it went to the current rate of $455. To be exempt, an employee must meet a three-part test. This includes the following:
• the employee must be paid on a salary basis at not less than $455 per week which is equivalent to $23,660 annually • the employee must be paid on a salary basis; AND • the employee must meet the “job duties test”. Thus, under the proposed regulations that will be issued the salary level test is expected to be changed to increase from $455 per week equivalent to $23,660 annually to a much higher figure such as $700 per week. If this occurs, obviously it will have the effect of including more people who are currently exempt and making them non-exempt because they do not meet this higher threshold. As non-exempt employees they will be entitled to overtime pay at the rate of time and a half for all those hours they currently work over 40 in a given work week that they are not being compensated for.
Thus, if the threshold under the proposed regulations increases to what many believe it will which is $700 a week ($36,400 annually), this would mean that all employers would be required to now pay overtime to any employees who make $700 a week or less as opposed to the current rules which only require you to pay overtime to those that are paid on a salary basis at a salary level of $455 per week who meet the applicable duties tests. Thus, by increasing this monetary threshold there will be many more employees who employers will have to pay overtime to.
There are other changes proposed as well. These changes will affect the duties test under each exemption. Under the proposed regulations, if less than 50% of an employee’s work time is spent performing “executive, administrative or professional” duties, they would no longer qualify to be exempt and would thus be entitled to overtime. The burden of course will be on the employer to prove that the employee spends more than 50% of his/her time engaging in executive, administrative or professional duties sufficient to meet the duties tests for these exemptions.
Therefore employers should be very careful to make sure that they can prove that exempt employees are spending at least 50% if not more of their working time performing executive, administrative or professional duties as set forth under the duties tests for the white-collar exemptions.