Federal government to revise white collar job exemptions

Payment of wages and overtime and deciding which workers are exempt from these requirements can be a confusing issue for employers in Minnesota and a primary cause of business litigation. However, the U.S. Department of Labor announced that it is considering updating its regulations governing which executive, administrative and professional employees are protected by the Fair Labor Standards Act.

For over 60 years, the USDOL has excluded white collar workers from wage protections when three tests are met. First, the employee must receive a predetermined and fixed salary that may not be reduced because of variations in the work performed. Next, the salary must meet a minimum specified amount which is $455 per week or $23,660 per year. Finally, the duties of the employee must mostly be executive, administrative or professional in nature.

Specific highly compensated employees are also exempt from overtime pay requirements if they receive total annual compensation of at least $100,000 which has to include $455 per week paid on a salary or fee basis. These employees must also customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative or professional employee.

DOL seeks to update the employee’s salary level, set in 2004, and to make the governing regulations more comprehensible for employers and workers. The new rules will set the standard salary level at the 40th percentile of weekly earnings for full-timed salaried workers at $921 per week or $47,892 per year.

This salary level lessens the risk of misclassifying workers who are entitled to overtime because of their salary levels and excluding from exemption the employees who meet the duties test. The salary will rise to $970 per week and $50,440 per year in 2016.

The rules will also increase the yearly compensation for exempting highly compensated employees to $122,148 annually which is the annualized value of the 90th percentile of weekly earnings of full-time salaried workers. Finally, the regulations will set a mechanism for automatically updating future salary and compensation levels so that it will be a useful and effective exemption test.

Legal advice can help decrease the risk of wage and employment disputes that can lead to civil or administrative hearings and financial penalties. Other business disputes may also be avoided with effective legal representation.

Source: U.S. Department of Labor, “Fact sheet: Proposed rukemaking to update the regulations defining and delimiting the exemptions for ‘white collar’ employees,” Retrieved Aug. 2, 2015

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