Obama Issues Presidential Memorandum Seeking To Expand Overtime Eligibility

March 14, 2014

On March 13, 2014, President Barack Obama issued a presidential memorandum, directing Secretary of Labor Thomas Perez to undertake a review and “propose revisions to modernize and streamline the existing overtime regulations” under the federal Fair Labor Standards Act (FLSA). In so doing, the president instructed the secretary to:

  • “consider how the regulations could be revised to update existing protections consistent with the intent of the Act”;
  • “address the changing nature of the workplace”; and
  • “simplify the regulations to make them easier for both workers and businesses to understand and apply.”

High-level administration and other officials anticipate that the proposed modifications will include an increase to the threshold salary requirement for most “white collar” exempt positions from the current $455 per week test to anywhere between $550 and $950 per week. There will also likely be a narrowing of the executive, administrative and professional exemptions (e.g., potential changes to the “two or more employee” supervisory test for the executive exemption).

Any changes to the salary threshold would be the first since 2004, which followed a request by then-President George W. Bush for the U.S. Department of Labor (DOL) to undertake a similar regulatory review. Among other things, those regulatory changes increased the salary threshold for most FLSA white collar positions to $455 per week or roughly $23,000 per year. Business groups that are concerned that an increase in the number of employees eligible for overtime will drive up costs in what is already a weak economy are expected to strongly oppose the DOL’s rulemaking process, which could take several years.

While the stated purpose of the memorandum is to encourage the DOL to bring the FLSA regulations up to date, it is also an indirect way to increase overall employee pay (assuming employers don’t reduce hours or headcount to adjust for the increased cost).

To view a copy of the presidential memorandum, click here.

To view a copy of the White House’s “fact sheet” issued with the presidential memorandum, click here.

After the regulatory process begins and proposed regulations are published, the DOL will accept public comment on any changes before they go into effect. For questions regarding the presidential memorandum, the regulatory rulemaking process or other matters related to the FLSA, please reach out to your McGuireWoods contact or a member of the firm’s Labor and Employment group.