On March 13, 2014, President Obama signed a presidential memorandum which instructs the Secretary of Labor to update regulations regarding overtime protections. According to White House officials, and supported by a fact sheet issued on that same date, the President’s memorandum will change the overtime laws so that a number of new workers would be entitled to overtime compensation.
Specifically, the change would amend employers’ wage and hour obligations as spelled out in the Fair Labor Standards Act (FLSA) to make overtime compensation available to a wider group of employees currently considered to be “exempt” from the FLSA’s overtime requirements.
The new rule is expected to extend the availability of overtime compensation for hours worked over 40 in a workweek to, for instance, managers working at fast-food restaurants, loan officers, computer technicians, and other workers who currently are classified as “executive” or “professional” under the FLSA’s definitions. The change, if implemented, could affect millions of workers.
Just last month, President Obama took action to raise the minimum wage for certain federal contractors to $10.10 per hour. The federal minimum wage currently is $7.25 per hour, but a number of recent proposals for an increase have been made. Many states already have increased minimum wages, with Washington at the highest rate, at $9.32 per hour.
According to Alfred B. Robinson, Jr., a shareholder in the Washington, D.C. office of Ogletree Deakins, “We know that the administration is focusing on the salary basis test for the new regulations. Currently the minimum salary requirement [for exempt employees] is $455 per week . . . . The administration’s position is that inflation has eroded this salary requirement. It has stated, for example, that approximately 3.1 million people would be entitled to overtime if the threshold had kept up with inflation. We anticipate that indexing the salary basis amount to the consumer price index or some comparable index is something that the administration will consider closely.”
Robinson, who previously served as the acting Administrator of the Wage and Hour Division (WHD) of the U.S. Department of Labor, continued, “The administration further has said that if the 1974 salary basis had been indexed, it would approach approximately $1,000 per week in today’s dollar.
The regulation changes proposed by President Obama now will have to go through the notice and comment period required under the Administrative Procedures Act, which may be lengthy.
This Update was written by Dara DeHaven and Margaret Santen Hanrahan, both shareholders in Ogletree Deakins’ Atlanta office, and members of the firm’s Wage & Hour Practice Group.