SHRM - HR Issues Update: Proposed Change to the Fair Labor Standards Act (FLSA)

March 12, 2014

Proposed Change to the Fair Labor Standards Act (FLSA)                      

It is anticipated that, yet this week, President Barack Obama will formally announce a proposed change to the Fair Labor Standards Act (FLSA) to direct the Department of Labor to revamp its regulations to require overtime pay for several million exempt employees who are currently classified as “executive or professional.”

As you know, under the FLSA 541 Regulations, an employee qualifies as exempt from the overtime requirements if he or she satisfies a “duties test” (does specific job responsibilities under the executive, administrative, professional, computer and outside sales regulations) and the employee is paid on a “salary basis” (that is, salary does not fluctuate based on hours that the person works). Under the current regulation, the employee must be paid a salary of $455 per week to meet the salary basis test. If the changes to the overtime regulations are made, it will fall to the Labor Department’s wage and hour administrator to put them into effect.

Although we still know little about what changes to the duties tests the administration will propose, it is likely that the changes will touch almost every employer and employee in the country. At this time, it is not clear whether the change to the FLSA will be issued as a proposed regulation from the Department of Labor (which is the normal process for a change of this magnitude) or an Executive Order from the administration, as a formal proposal has not yet been released by the administration.

According to press reports, the proposal will likely include an increase to the “salary basis” amount from $455 a week “by a significant amount.” This means that a substantial number of employees currently classified as exempt from the overtime requirements would be eligible for overtime pay.

SHRM’s Government Affairs Department will continue to monitor developments and will provide a thorough analysis of the proposed change once it is formally released. After our review, we’ll send an update to the membership outlining the key components. The last time the 541 Regulations were modified (which was about 10 years ago) SHRM engaged in a significant direct lobbying and advocacy effort. As in the past, SHRM will be actively involved in communicating HR’s position on this proposed change to the Department of Labor and the Obama administration. The timing of this announcement could not be better since Department of Labor Secretary Thomas Perez will present the closing plenary session next Tuesday, March 18, at the SHRM Employment Law & Legislative Conference. Below is the session description.

General Session with Thomas Perez, U.S. Secretary of Labor

Thomas Perez, sworn into office as the nation’s 26th Secretary of Labor in July 2013, oversees the department and its policies affecting our nation's workforce. During this session, you will have an exceptional opportunity to hear directly from the nation’s top official on workplace policy as he highlights DOL’s priorities, including to ensure that workers have the skills they need to succeed, the agency’s enforcement focus, the need to raise the minimum wage and the administration’s emphasis on long-term unemployment.

There’s still time to register to attend the conference and hear exclusive details from Secretary Perez. To register TODAY, click HERE.