The U.S. Department of Labor (DOL) proposes to update the regulations governing which executive, administrative, and professional employees are entitled to minimum wage and overtime pay protections set forth in the Fair Labor Standards Act. The DOL last updated these regulations in 2004, which, among other items, set the standard salary level at not less than $455 per week.

Key provisions of the proposed rule include: (1) setting the standard salary level required for exemption (which is currently $455 per week, or $23,660 annually) at the 40th percentile of weekly earnings for full-time salaried workers (projected to be $970 per week, or $50,440 annually, in 2016); (2) increasing the total annual compensation requirement needed to exempt highly compensated employees (currently $100,000 annually) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and (3) establishing a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

After receiving nearly 250,000 comments during the comment period, the DOL sent the proposed rule changes to the Office of Management and Budget (OMB) this week.  Typically, the OMB reviews proposed rules within 30-60 days.  Under the Congressional Review Act, Congress has 60 days from the issuance of the final rule in which to pass a joint resolution in an attempt to block the proposed rule.  If Congress does not take action, the proposed rule will in all likelihood go into effect in July.  If Congress passes a joint resolution to block the proposed rule, it is likely that President Obama will veto the joint resolution.  Congress then has 30 days in which to override the veto.  Assuming that Congress does not have sufficient votes to override a veto, the proposed rule will go into effect at the end of the summer.

Employers should prepare for the rule changes before they go into effect.  At a minimum, employers should review job descriptions and employee classifications.  Employers should also consider whether it is more cost-effective to give raises to exempt employees who are currently below the 40th percentile of weekly earnings for full-time exempt employees up to the salary level needed to qualify for the exemption under the new rule rather than to pay overtime pay to those workers who will no longer qualify for the FLSA exemption.

For more information on the Fair Labor Standards Act, please contact Anne Zachritz at 272-9241 or

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