Advances in the White-Collar Overtime Proposal

As previously discussed the FLSA White Collar Exception will be expanded to millions of currently exempt Americans by December 2016. White-Collar exception will be expanded from the 2004 – $23,660 per year – threshold (in 2004 $23,660 was equivalent to approximately $30,000 today) to $47,476. The original proposal drafted in 2015 would have been the largest increase since 1975 – 2004, proposed at $50,440 per year. The Department of Labor likely decided on the $47,476 threshold to reach the largest group of American workers without seeing great resistance from employers.

As a reminder, the white collar exception, is a threshold that federal law is triggered requiring employers to pay their employees time-and-a-half for working beyond 40 hours per week. In addition to requiring a salary of at least $23,660 the employees must preform managerial, administrative, or professional duties. For a detailed analysis of exactly what those “managerial” “administrative” or “professional” duties entail, consult a local attorney (local rules apply).

The Labor Department does not need congressional approval to enact the changes, but congress may review the changes within 60 legislative days after it is finalized by the department. If by joint resolution both the House and Senate rejects the proposal the President may sign its rejection. It is possible a newly elected 2017 president might sign the rejection.

Summary

  • The salary threshold for the executive, administrative, and professional exemptions is increased to $47,476 ($913 per week). This number includes the 40th percentile of full-time salaried workers in the South (the lowest-wage region in the country).

  • Highly compensated employees subject to a ‘minimal duties’ test will increase from $100,000 to $134,004, which nationally includes the 90th percentile of full-time salaried workers.

  • The salary threshold ($47,476) for the executive, administrative, professional, and highly compensated employee exemptions will be automatically revised every three years (December 2019) to maintain the 40th percentile in the lowest-wage census region.

  • The salary basis test allows employers to use commissions, incentive payments, and non-discretionary bonuses to satisfy up to 10 percent of the salary threshold.