There has been a great deal of speculation recently about whether the U.S. Department of Labor will increase the minimum salaries required for employees to qualify for the White Collar Exemptions from the minimum wage and overtime provisions of the Fair Labor Standards Act (“FLSA”). This could have important implications for how restaurants determine which positions should be salaried and how certain roles are defined within their job descriptions
Background on White Collar Exemption and Recent Updates
The “White Collar Exemption” regulations contain the criteria for determining which employees may qualify for the Executive, Administrative, Professional, Computer, and Outside Sales exemptions. With a few exceptions, the criteria include job duties requirements and compensation requirements, both of which must be satisfied in order to properly classify an employee as exempt.
As many readers may recall, the last time the regulations governing the White Collar Exemptions were comprehensively overhauled was in 2004 under the George W. Bush Administration.
Since 2004, the DOL has attempted to change these regulations only twice, and both times the focus was on the compensation requirements. In 2016, in the late stages of the Obama Administration, the DOL completed a multi-year rulemaking proceeding before issuing a Final Rule that would have more than doubled the then-current minimum salary of $455 per week to $913 per week, or from $23,660 per year to $47,476 per year. The Obama Rule also would have raised the so-called “highly compensated employee” exemption threshold from $100,000 per year to $134,004 per year. The minimum compensation levels would have been indexed, meaning that the levels would be automatically increased every three years without further notice-and-comment rulemaking proceedings.
Thanks to a legal challenge pursued by a coalition of national business groups and employer organizations, the Obama Rule was shot down just before it was scheduled to become effective on December 1, 2016. The next month, Donald Trump became president, and the leadership of the DOL changed hands. The Trump DOL eventually ended the litigation, and promised to revisit the subject in a later rulemaking proceeding.
The DOL then did exactly what it said it would do, and opened a new rulemaking proceeding that eventually led to publication of a new Final Rule that became effective January 1, 2020. This time the DOL implemented more modest increases to the minimum compensation levels, increasing the minimum weekly salary of $455 per week to $684 per week, and the threshold compensation for highly compensated employees from $100,000 per year to $107,432 per year. The Trump Rule did not include an indexing provision.
Proposed Updates to Exemption Rules On The Way
Fast forward to the present, and we now have a Secretary of Labor who has declared that the current compensation and salary minimums are too low and need to be increased. President Biden has expressed the same views.
Since the fall of 2021, the Biden DOL has had on its regulatory agenda changes to the While Collar Exemption regulations. This would require the DOL to publish a notice of proposed rulemaking, and so far none has been published. However, the widespread expectation is that the DOL will propose changing the criteria used in determining who qualifies for the White Collar Exemptions. The DOL could take a comprehensive approach, by proposing changes to the job duties criteria as well as the compensation criteria. On the other hand, the DOL could take a more limited approach, proposing changes only to the compensation requirements and minimum salary levels, and possibly adding back an indexing provision similar to that of the Obama regulations that never took effect.
On March 30, the U.S. Senate rejected President Biden’s nomination of David Weil as Administrator of the DOL’s Wage and Hour Division. The President will now have to nominate a new Administrator, which is undoubtedly a setback for his administration. However, it remains to be seen whether it will slow the DOL’s pursuit of changes to the White Collar Exemption regulations.
Conclusion
The only safe bet at this time is that the DOL is likely to open the White Collar Exemption regulations to a new rulemaking proceeding. It is much harder to predict exactly what the DOL will propose or when the proposal will be published. To be sure, the rulemaking proceeding will include a public comment period, so parties on both sides of the issues will have an opportunity to evaluate what the DOL proposes and to submit comments.
Stay tuned, because there will almost surely be more to come on this issue in 2022.
Jim Coleman is a partner and co-chair of the wage and hour practice group at Constangy, Brooks, Smith & Prophete. He practices in the firm’s Metro Washington D.C. office, where he counsels employers on wage and hour matters, as well as defends them in wage and hour litigation and administrative proceedings. He can be reached at jcoleman@constangy.com.
