July 2014

Although the Fair Labor Standards Act (FLSA) provides numerous ways to exempt an employee from overtime compensation under federal law, the vast majority of exempt employees are categorized under the commonly known “white collar exemptions” (Executive, Administrative and Professional). But a recently introduced bill would change the landscape for employers who place employees under these exemptions.

Generally speaking, under the white collar exemptions employers must pay an employee a minimum guaranteed salary of $455.00 a week and ensure the employee’s work duties meet other specific criteria before exempting him or her from overtime compensation. But this new bill seeks to make significant changes that would pose challenges for employers. Among the proposed changes are:

• A requirement that the guaranteed minimum salary steadily rise to $1090.00 a week and thereafter tie future salary increases to inflation.
• A requirement that exempt employees cannot spend more than half their time on non-exempt tasks. This change is specifically notable for employers in the service industry, where, for example, exempt restaurant managers often engage in non-exempt tasks, such as cooking, cleaning and serving, to keep business running smoothly and efficiently.

However, regardless of whether this bill becomes law, it is clear that the administration is pushing hard for overtime reform in other ways. In March of this year President Obama ordered the Department of Labor (DOL) to update its overtime regulations, which would include eligibility requirements for properly classifying an employee as exempt. The DOL has not yet published its proposed regulations, but we are closely monitoring exactly what they plan to do and how they plan to do it.

Given the government’s renewed push on overtime, employers are strongly encouraged to review their workforce and ensure proper classification of employees as exempt or non-exempt. In addition, employers may want to consider determining what percentage of time exempt employees perform non-exempt tasks. For more information on overtime compensation or to assist with questions on any aspect of the FLSA, contact the experienced attorneys at Wessels Sherman.

Questions? Call Wessels Sherman’s Minneapolis, MN office: 952-746-1700