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
24 Jan 2019, Other, New York, United States

Join Dentons’ Health Care Partner Lori Mihalich-Levin and White Collar & Government Investigations Counsel Christine Genaitis as they lead conference sessions at AHLA Academic Medical Centers and Teaching Hospitals Institute.

30 Jan 2019, Other, Chicago, United States

Please join us on January 30, 2019, for the Fifth Annual Courageous Counsel Leadership Institute. This year's theme is "Risk and reward: Creating a culture that promotes innovation, change and growth.

Similar Articles
Relevancy Powered by MondaqAI
Frankfurt Kurnit Klein & Selz
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Frankfurt Kurnit Klein & Selz
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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