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Proposed Changes to FLSA Overtime Rules

On June 30, 2015, the United States Department of Labor (DOL) released proposed regulations that would amend various provisions of the Fair Labor Standards Act (FLSA). In particular, the DOL proposed changes to the regulations governing the “white collar” exemption for executive, administrative, and professional employees. The FLSA (and wage and hour laws, generally) are complicated but we will try to break down the key changes as simply as possible. FLSA Overview

The FLSA generally requires employers to pay its employees at least the federal minimum wage plus overtime at a rate of at least 1.5 times the employee’s regular rate of pay for any hours worked over 40 in a week. However, the FLSA provides for various exemptions from the overtime requirement.

The most commonly used exemptions are for executive, administrative, and professional employees, and are often referred to as the “white collar” exemptions. However, the FLSA does not define the terms “executive,” “administrative,” “professional,” or “outside salesman” and the regulations have generally required that each of the following three tests be satisfied for the exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (the “salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “duties test”).

The regulations also exempt “highly compensated” employees who “customarily and regularly” perform one of the exempt duties of an administrative, executive or professional employee, but who do not otherwise meet the duties test. Currently, and since 2004, an employee earning $100,000 in total annual compensation (with at least $455 paid weekly on a salary or fee basis) would be exempt from overtime as a highly compensated employee.

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