Updates to White Collar Exemption Requirement

Updates to FLSA White Collar Exemption Requirements Announced

Following a directive from President Obama, the Department of Labor has proposed changes to the federal Fair Labor Standards Act (FLSA) rules regarding the executive, professional, and administrative exemptions (also called the white collar exemptions).

Under the proposed rule, the annual salary requirement for a white collar exempt employee would more than double to approximately $50,000. This more-than-doubling of the salary requirement would mean that approximately five million workers who are currently exempt from overtime and minimum wage requirements would no longer qualify for an exemption. In addition to the white collar salary requirement increasing, the proposed rules call for the salary requirement for exempt highly compensated employees to increase from $100,000 to about $122,000 per year. Finally, the rules contain a mechanism by which both the white collar and highly compensated employee salary requirements will adjust annually. Before these proposed rules can go into effect, there will be a notice and comment period, followed by time for the Department of Labor to review and respond to comments and draft final rules. The last time large revisions were made to the FLSA, in 2004, 13 months elapsed between the introduction of the proposed rules and the release of the final rules. As before, we expect a large number of comments and much opposition from the business sector, and therefore a similarly long span of time before the rules are finalized. While it will likely be mid-to-late 2016 or even early 2017 before any changes to the FLSA white collar exemptions go into effect, given the sizeable increase to the salary requirement, we recommend employers begin to consider how they will handle the new requirements in their organization.