Proposed Regulations for White Collar Exemptions - Major Changes In Store

The oldest employment statute, the Fair Labor Standards Act of 1938, has been operated under substantive regulations that have not changed dramatically in the working lives of most current employees. One area of change, the so called white collar exemptions, has not had any substantial substantive re-writing since 1950, and the key dollar amounts, which were originally to be the primary indicator of status have not changed since 1975. Given the basic premise of the wage and hour law, this is a key set of regulations and change has been greatly needed. Under the wage and hour law, the initial presumption is that every employee is entitled to overtime compensation of 1.5 times their regular rate of pay for every hour worked over 40 in a work week. To avoid paying overtime, the employer has the burden of showing that the employee is exempt. By far the most common exemptions are the white collar exemptions for executive, administrative, professional and outside salesmen. The first three are sometimes referred to as EAP. After a few days of news releases and stories about the proposed changes, the actual proposed regulations are here in pdf or text format.


Briefly, the two part test (the long and short form) which had $155 and $250 figures to distinguish between them are now gone. As a practical matter, the long form test had not been utilized in years. There will now be a three tiered system for salaried employees who perform non-manual jobs:

up to $22,100, overtime is mandatory;

from $22,100 to $65,000, new white collar exemption rules will determine eligibility for overtime;

$65,000, no overtime, as long as employee performs one of the exempt duties listed under the executive, administrative or professional regulations.

In addition to the new three tier system and changes in the basic rules for determining whether some one is exempt under one of the regulations, the rules of what constitutes a salaried employee (still a pre-requisite for the EAP exemptions) have changed to ease the danger of losing the exemption on a large of class of employees inadvertently. Employers would also be allowed the right to suspend exempt employees for disciplinary reasons.


It should be stressed these are only proposed regulations and the Department of Labor has identified a number of areas where they specifically invite comments. The comment period runs through June 30th. Given the nature of the regulations and the major changes, there will almost certainly be a large number of comments. It is unlikely that the final regulations, which could possibly have substantial changes from this proposal, would be in effect before 2004 at the very earliest. Over the next few days I will take a look at some of the more specific provisions.