White Collar Exemptions Continue to Be Awash with Questions

To recap, persons qualifying for what is commonly referred to as the “white collar” exemptions are exempt from the entitlement to overtime pay under the Fair Labor Standards Act (FLSA).  White collar exemptions are the executive, administrative, and professional exemptions.  With few exceptions (like teachers and attorneys) to qualify for a white collar exemption, the Department of Labor (DOL) has required, among other things, positions to be paid a minimum specified weekly salary.

In 2004, the DOL set that minimum weekly salary at $455 per week (which, if one worked 52 weeks in a year, would equal $23,660 annually).  That rate remained the same until 2016 when the Obama administration proposed to increase the rate to $913 per week (or $47,476 annualized), with an automatic accelerator built-in for successive years. The change was set to go into effect December 1, 2016.

As employers began preparing for this increase – be it reclassification of positions, increases in pay, changes in duties, or the like – lawsuits were filed contesting the proposed regulations.  On November 22, 2016, days before the regulation was to take effect, the United States District Court for the Eastern District of Texas entered an injunction, stopping the regulation from taking effect anywhere until such time as the litigation could be resolved.

Time passed.  A new administration took the helm.  The Trump administration was not as excited about the changes as the previous administration, which brings us to today. 

The DOL has formally advised the court that it will no longer advocate in favor of the 2016 regulations.  The DOL has maintained its concern with the issue.  To that end, it issued questions to the public in late July and sought comments through late September on a multitude of issues surrounding the white collar exemptions.  The questions elicited information on topics such as the salary level to be used; whether it should be the same for all three white collar exemptions; whether the salary should vary based upon region, employer size, etc.; the salary’s relationship to the “duties” test; employer’s actions already taken in response to the proposed 2016 regulations; the impact of non-discretionary bonuses and incentive payments; and if and how salary levels should be automatically increased over time.

All of this to say; the Department of Labor under the Trump administration seems disinterested in keeping the Obama administration’s version of the regulations.  It does, however, seem interested in making some adjustments to the 2004 regulations.  It should.  There have been many changes to the way in which we work from 2004 to 2017 (almost 2018).  It would be good for all parties to have a fresh look at the system to ensure business has the opportunity to attract, retain, and grow while ensuring employees have the opportunity for a fair day’s pay for a fair day’s work.  If clarity could be accomplished, it should also help to minimize the very costly class and collective lawsuits currently being filed alleging employers have “mis-classified” groups of employees.

When will this utopia of clarity arrive?  Ah.  That is anyone’s guess.  The DOL does not have a timeline by which it must act.  In fact, it is not required to do anything at all with the regulations.  For now, all parties (employers, employees, and attorneys for both) continue to make the best decisions they can on any given day.

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