On March 13, 2014, President Obama instructed the Department of Labor to update federal regulations defining which “white collar” employees are protected by minimum wage and overtime rules.  This past summer, the Department of Labor published the proposed final rules and it appears that the final rules will be issued later this spring or summer.  

The final rules are expected to change the “salary basis” test for exempt employees by increasing the minimum salary to at least $921 per week, or $47,892 annually (up from $455 per week, $23,660 annually), although the final numbers are currently projected to be around $970 per week or $50,440 annually.  Keep in mind that the salary requirements will automatically increase each year.  This increased threshold could significantly increase the number of non-exempt employees and, in turn, increase a company’s overtime pay obligations.

Although the proposed Final Rule does not include any changes to the “duties” tests for the executive, administrative and professional employee exemptions, the Department of Labor did solicit comments on possible changes to those tests.  This suggests the Department of Labor is at least considering potential changes to the duties tests.  But at this point, it is simply unknown whether the Final Rules will contain any such changes. 

Once the Department of Labor publishes the Final Rule, employers will have only around thirty to sixty days to comply.  Employers should take action now to determine which employees will meet the new salary requirements.  Because exempt employees may need to be reclassified as non-exempt, employers should also prepare to communicate these changes to employees and review overtime practices and policies.  Finally, because these rule changes result in increased scrutiny of employers’ pay practices, now is a good time for employers to consult with counsel on an internal audit to ensure compliance with wage and hour regulations.