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Update on Proposed Amendments to FLSA “White Collar Exemption” Regulations

By James J. Swartz, Jr.

As we have noted in prior blog posts, the Department of Labor (DOL) anticipates soon publishing and making effective its final amendments to the so-called “white collar exemption” regulations, which define the FLSA exemptions for certain executive, administrative, and professional employees.

The primary anticipated change relates to the minimum salary amount to meet the white collar exemptions. Currently, to qualify for the white collar exemptions, an employee must receive a minimum of $455 per week on a salary basis (the equivalent of $23,660 annually). The proposed regulations dramatically increase that amount to about $970 per week ($50,440 annually). The DOL has also proposed mechanisms to adjust the minimum salary level annually—tied to either the 40th percentile of weekly earnings for full-time salaried workers or the Consumer Price Index.

As with other pending significant executive and legislative action in this presidential election year, executive (agency) actors and Congress are maneuvering to either implement or thwart the proposed regulations. On March 14, somewhat ahead of schedule, DOL sent the final regulation to the Office of Management and Budget (OMB) for OMB’s review. The length of time for OMB’s review varies, but usually ranges from 30 to 60 days. Most likely, then, the final regulations will be revealed before mid-May.

Commentators have speculated about the motivation for this accelerated action by DOL (as well as other executive agencies): the Congressional Review Act. Under the Act, Congress has 60 legislative days to veto (via a resolution of disapproval) the proposed regulation. Of course, the disapproval may be overridden by Presidential veto. Note that legislative days are limited, and could cause a resolution of disapproval to be addressed by President Obama’s successor. If that successor is one of the Republican contenders, it appears likely that a Congressional resolution of disapproval would stand, nullifying the final proposed regulation and the accompanying increase in the salary levels. If, however, a resolution of disapproval reaches President Obama (or a Democratic successor), it would face likely veto.

Congress isn’t waiting around for OMB to complete its review of the regulations. On March 18, House and Senate Republicans introduced the “Protecting Workplace Advancement and Opportunity Act,” which would nullify the proposed changes to the white collar regulations, require DOL to conduct an economic analysis of its impact, prohibit automatic increases in the salary level, and require that future changes to the duties test be subject to notice and comment. The proposed legislation is broader than a mere resolution of disapproval would be—it provides for prospective limitations on DOL’s efforts to modify the white collar duties test and otherwise limits DOL’s ability to implement automatic changes to the regulations.

These remaining disputes over the final regulations provide employers additional time to review currently exempt white collar employees, and consider and prepare to implement changes to classification or operational practices to accommodate the anticipated increase in salary requirements under the proposed regulations.