United States: New Relationships With Your Business' Managers, Administrators And Professionals? The Labor Department's Forthcoming Overtime Regulations

Last Updated: October 3 2014
Article by Seth Harris

Some time this autumn, the US Department of Labor's Wage and Hour Administration will send a draft proposed regulation to the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA). This regulation, if it is finalized, will make important changes to the rules governing whether executive, administrative and professional employees must receive time and one-half their regular hourly rate of pay for hours worked in excess of forty in a week under the Fair Labor Standards Act (FLSA). Three months or less after receiving the proposed regulation, OIRA will release it and the Labor Department will publish it in the Federal Register.

Until the proposed regulation is published, we will not know what the Labor Department will propose. But we know that the Obama Administration will make an aggressive push to finalize the regulations and, more likely than not, the overtime rules will change in a meaningful way. On March 13, 2014, President Obama issued a memorandum to his Secretary of Labor directing him to revise the overtime regulations. Of course, the President doesn't need to publish memos to his staff to get things done. By making this assignment public, however, the President emphasized that the new proposed regulations will have his strong support and potential opponents can expect a fight over whether more workers should receive overtime pay. The smart bet is that the regulations will be finalized. Expect them by the middle of 2016.

The current test for determining whether executive, administrative and professional employees are exempt from the FLSA's overtime requirement has four elements. First, only employees paid a salary can be exempt ("salary basis"). The salary basis test will likely remain untouched in the proposed regulation. The law in this area is reasonably well-settled and straightforward. Second, the salary must exceed $455 per week ("salary threshold"). Third, the employee must engage in certain job duties specified in the regulations ("substantive duties"). Finally, the specified duties must be the employee's "primary duty." These last three elements are ripe for revision in the Labor Department's proposal.

The salary threshold is the likeliest part of the test to be changed. The current threshold amounts to $23,660 for a full-year employee. Discussion in Washington has centered on an increase to $900 per week or more. Another possibility is that the Labor Department will adopt the average weekly wage of private-sector non-supervisory employees, or around $683 per week, as the new threshold. At any of these levels, millions of additional workers who are currently treated as exempt will be newly subject to the FLSA's overtime requirement. Every employer that currently classifies any of its managers, administrators or professionals as exempt employees should assess whether the higher salary threshold will change these employees' overtime status. For some employers, the budget impact will be substantial, so planning should begin immediately. Since the proposed rule will very likely index any new threshold to some measure of inflation to reduce the need for future changes to the regulation, employers should expect to undertake this assessment annually, if not more frequently.

The Labor Department's changes to the overtime regulations could end with the salary threshold. But the proposed regulation may go farther. Executive, administrative and professional employees each have different substantive duties tests. However, the proposed regulation would likely focus on the exemption for "executives." An "executive" need only manage a defined unit or establishment, supervise two or more employees, and have the authority to hire and fire or make recommendations about hiring, firing, promotions, or advancement. The Labor Department could propose to make this test more difficult to satisfy.

There has already been a great deal of grumbling from the business community and trade associations about possible changes to the substantive duties tests. This is the part of the exemption rules that generates the most litigation since it requires a fact-intensive, case-by-case analysis and the outcome cannot always be predicted.  Many employers have concluded, for all of its flaws and ambiguities, they are comfortable enough applying the existing test that they do not want it to change. It will be interesting to learn if the Labor Department takes on this fight, even after raising the salary threshold. If it does, and the changes survive the regulatory process, employers will be forced to reexamine the work responsibilities of entire categories of exempt managers, supervisors, administrators and professionals, as well as the people with whom they work.

The proposed regulations may also clarify the meaning of "primary" in the "primary duty" test. Under the existing regulations, it is possible to be an exempt employee even when spending more than half of work time performing non-exempt work, for example, tending the cash register in a retail store or serving customers in a fast-food establishment.  Courts have found employees for whom non-exempt work constituted 75 percent, 80 percent, or even 99 percent of their time to be exempt. The Labor Department may propose a bright line test of 50 percent or another fixed percentage as a floor for determining whether exempt responsibilities, like managing for an executive employee, are the "primary duty."

Even though this new overtime regulation is likely to move quickly through the process to finalization, employers have the opportunity to influence the substance of the regulation before it becomes final and has the force of law. The proposed regulation will be open to comment by interested parties, probably for 90 or 120 days. Employers can share their knowledge, experience and evidence in comments filed with the Labor Department during the comment period. They can also suggest how the regulations should change to best serve the 21st century workplace and the people who work in it.

In the meantime, employers who currently classify employees as exempt under the existing regulations should inventory their overtime practices. They should review job classifications and pay structures, compensate misclassified employees, eliminate "off the clock" practices and double-check rate calculations. They should also consider seeking counsel from objective outsiders who can offer unfettered judgment about where they currently stand and where the new regulations might take them.

The new overtime regulations will not be final for at least a year. But it is never too soon to avoid the risk of overtime liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
17 Jan 2018, Seminar, Los Angeles, United States

Dentons is pleased to offer a full day of California CLE-approved classes, just in time to meet the California MCLE compliance period deadline of February 1, 2018.*

18 Jan 2018, Conference, Washington, DC, United States

Please join us for the Dentons Forum for Women Executives luncheon featuring Rebecca Boggs Roberts, NPR journalist and author of Suffragists in Washington, D.C.: The 1913 Parade and the Fight for the Vote.

24 Jan 2018, Seminar, San Francisco, United States

Dentons will host our Fourth Annual Courageous Counsel Leadership Institute in January, centered on the theme "Cultivating Innovation."

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions