|June 26, 2014|
Previously published on June 19, 2014
Yesterday, a group of nine Senate Democrats proposed new legislation (S. 2486) that would increase the amount of salary that must be paid to certain employees. Led by Senator Tom Harkin, D-Iowa, the group seeks to change the Fair Labor Standards Act (“FLSA”) in two significant ways, and those changes mirror those requested from the U.S. Department of Labor (“DOL”) by President Obama earlier this year. Both changes would apply to employees who are exempted from the FLSA’s overtime requirements under the widely-used “white collar” exemptions.
Since 2004, employees earning more than $455 per week on a salary basis meet the first white collar requirement for exemption from the overtime provisions of the FLSA. On an annual basis, that weekly salary translates to $23,660 for exempt employees. While this weekly amount was an increase over levels previously required by the DOL, and though many exempt employees earn well more than the weekly minimum, President Obama and Senator Harkin’s group believe the minimum needs to be adjusted to keep up with changing income levels.
The proposed legislation would raise the weekly minimum in stages. The first increase - which would not take place until one year after the law is enacted - would go to $665 per week. The minimum would increase to $865 per week on the second anniversary of the enactment and then $1,090 per week on the third anniversary. The minimum annual salary at this point would be $56,680. Starting on the fourth anniversary and thereafter, the weekly minimum would increase by an adjusted amount based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. Employees who do not receive these weekly minimum amounts would not qualify for most of the white collar exemptions.
The second change is to the “primary duty” test that was put in place with the DOL’s 2004 regulatory changes. Prior to 2004, the white collar exemptions were only available to employees who spent a certain percentage of their time performing “exempt” tasks. The primary duty test did away with those percentages. Senator Harkin’s proposed legislation would reincarnate the percentage analysis by requiring that employees spend at least 50% of their working time on “exempt” tasks.
President Obama requested both of these changes earlier this year, except that his request was to the DOL and has not yet been specific as to all the changes that would be made. Instead of amending the interpreting regulations through the DOL, this recently proposed legislation would amend the law itself, and would not have to undergo notice-and-comment rulemaking.
Congressional Republicans are certain to oppose this newly-proposed legislation and it is very likely to fail in the House of Representatives. However, even if this legislation fails, the content of the proposed amendment provides useful insight into what the DOL is likely to pursue sometime in 2014.
All employers should consider whether any of their exempt employees would be impacted by an increase to the minimum weekly salary level. While change might not come for more than a year, an increase to this minimum level is likely to come at some point.