On March 13, 2014 President Obama issued a memorandum instructing the Department of Labor (“DOL”) to review and revise overtime regulations under the Fair Labor Standards Act (“FLSA”). Under the FLSA employees are eligible to receive overtime for all hours worked over 40 per week, unless they fall within certain specified exemptions. The most common of exempt classifications in the retail industry are executive, administrative, and commission sales.
The executive exemption applies to managers and supervisors who direct the work of others and who earn a salary of at least $455 per week. The administrative exemption applies to employees who (i) earn a minimum weekly salary of $455, (ii) perform non-manual work directly related to the employer’s business operations and (iii) have as a primary duty the exercise of discretion and independent judgment with respect to matters of significance. The commissioned sales person exemption applies to employees who receive more than half of their earnings from commissions.
The upcoming changes to overtime regulations will be the first since 2004, when the threshold for the executive exemption was raised from $250 to $455 per week.
While the exact changes the Obama administration has in mind remain unclear, the impact on the retail industry, and indeed nearly all employers, may be be significant because the express purpose of the mandated review is to increase the number of workers eligible for overtime. One likely change will be a further increase to the minimum weekly salary threshold for executive and administrative exemptions. Inasmuch as many, if not most, exempt employees already have salaries of more than $455 per week, the change to the salary threshold alone might not be significant – depending on the new minimum. But, other changes cannot be ruled out.
The DOL has not indicated when it expects to issue the proposed amendments. A comment period will follow before any rule amendments are adopted, however. Rulemaking may take a year or more. We will be monitoring the process and will alert you here to developments.
In addition, you may wish to download the EBG Wage & Hour app to your smart phone, where changes to the regulations will also be posted.