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A Dramatic Increase of the White Collar Exemption Salary Threshold in the Works?

The salary threshold to be exempt from federal minimum wage and overtime requirements is predicted to increase dramatically. As we reported last year, President Obama issued an executive order instructing the Department of Labor (“DOL”) to re-examine the white collar exemptions to the minimum wage and overtime requirements of the federal Fair Labor Standards Act, “modernize and streamline” them, and “simplify” them so they are more easily understood. At that time, many believed one of the changes would be to increase the minimum salary workers must be paid to qualify for the white collar exemptions, currently set at just $455 per week ($23,660 per year).

The white collar exemptions apply to certain executive or administrative employees and certain professionals. President Obama’s reasoning in ordering this overhaul is the salary threshold has not kept pace with inflation and the white collar exemptions therefore currently apply to millions of low-wage workers who were never intended to be exempted from minimum wage and overtime requirements.

While the Department of Labor originally planned to issue a notice of proposed rulemaking (the “NPRM”) in November 2014, this schedule was later delayed and now is expected in February. But we already have a peek under the tent: an internet news outlet reported a think tank vice president recently spoke with White House officials and believes the minimum yearly salary will almost double to $42,000.

If this dramatic increase occurs, many businesses that rely on managers who work well in excess of 40 hours per week will incur dramatically increased costs. These employers’ business models may be destroyed. It seems likely this change will cause businesses to close. Thus, the change in the white collar exemption could put unsuspecting low earning workers out of a job. Time will tell if this happens.

This information remains speculative until the DOL issues the NPRM. Given it has already delayed the issuance of the NPRM once, the DOL seems in no hurry. Even after the DOL issues the NPRM, the salary threshold and any other proposed changes could still be modified as a result of feedback received during the public comment period which will likely be provided for by the DOL.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.