Hunton Employment & Labor Perspectives

President Barack Obama is expected today to direct the Department of Labor to revise its wage-payment regulations so that more workers will receive overtime compensation. 

Currently, the Fair Labor Standards Act provides an overtime exemption for categories of salaried employees who receive at least $455 a week.  President Obama intends to increase the weekly $455 salary threshold so that employers must pay affected employees a higher salary, cut their hours, or pay them overtime for work in excess of 40 hours a week.

The directive could also affect the type of work employees need to perform in order to fall into the exempt “executive” category.  Under the proposed change, in order for an employee to be exempt from overtime as an “executive” employee under the FLSA, the employee will need to perform a higher percentage of “executive” work than under the current standard.

The proposed changes could have a significant effect on employers across the country.  If employers are forced to cut employees’ hours, they will likely need to hire new workers in order to pick up the additional work.  The directive could cause employers to reclassify salaried employees as hourly employees, potentially affecting benefits or job functions.  There is also the danger that employers will illegally require employees to work off the clock in an effort to avoid paying overtime. 

In complying with the new federal regulations, employers should also ensure that they are in compliance with state law, as states such as New York and California have already passed threshold amounts above the current federal minimum of $455. 

It is unknown how much the salary threshold will increase.  The Department of Labor will solicit comments on the proposed changes before they go into effect.