United States: Employment Law Commentary - December 2014

Last Updated: January 13 2015
Article by Jeremy B. Merkelson and Lawrence Rajczak


Recently, President Obama sat down for an interview with Stephen Colbert in which he was asked about his 2008 campaign mantra that presidents tended to grab too much power. "Then you became president, and you seemed to hold a lot of power," Colbert said. "Does that happen to every president?"

Obama's response revealed a president resigned to going it alone on his most important priorities: "For the first time, you're asking a sensible question," he chided. "The structure of our democracy is checks and balances and every president, even if on the outside they were complaining, there's always the temptation to want to go ahead and get stuff done."

Whether that temptation will yield to compromise in the final two years of the Obama Administration is a fate yet to be foretold. But if the past is prologue, we already know the answer to this equation: Republican majority in Congress plus Obama Administration ≠ a likely recipe for compromise.

So what are the Administration's labor and employment priorities in the next year before presidential politics removes any hope of legislative compromise? This article explores the following non-exhaustive list of those initiatives: (1) the Administration's forthcoming revisions to the Fair Labor Standards Act (FLSA) overtime exemption regulations; (2) the President's recent executive actions concerning immigration and their impact on the employment of high-skilled workers; (3) the re-issued "quickie election" rules of the National Labor Relations Board (NLRB) and their prospects for survival with the new Congress; (4) new developments in prohibiting sexual orientation discrimination, including regulations re-defining the term "spouse" under the Family and Medical Leave Act, and the prospects for passage of the landmark Employment Non-Discrimination Act; (5) the Labor Department's use of its "hot goods" authority to crack down on farmers who ship agricultural goods produced in violation of child labor and wage laws; and (6) the potential Republican responses to these initiatives, including use of spending riders, oversight hearings, legislation, and lawsuits.

FLSA Overtime Exemptions Overhaul

On March 13, 2014, President Obama issued a Presidential Memorandum to update overtime regulations under Section 541 of the FLSA. The Memorandum specifically directs the Secretary to "modernize and streamline the existing overtime regulations" while taking into consideration "how the regulations could be revised to update existing protections consistent with the intent of the Act; the changing nature of the workplace; and to simplify the regulations to make them easier for both workers and businesses to understand and apply."

The proposed rulemaking, which was first expected earlier this summer and postponed multiple times, is slated to finally become public in February 2015, according to a December filing by the Department of Labor (DOL) with the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA).

Although yet to be released, the Presidential Memorandum and comments earlier this year from Secretary Perez regarding the proposed rulemaking give the impression that the Administration will revise the salary threshold and the "primary duties" criteria for an employee to be considered exempt under the administrative, professional, outside sales, or computer professional exemptions (the so-called "white collar" exemptions). The salary threshold ($455/week) is very likely to be raised (one study proposes more than twice that amount as the appropriate salary basis), and some form of quantification analysis for determining how much time an employee spends on "primary duties" may also be in the cards (i.e., replacing the flexibility and functional analysis of the current test with a specific time percentage). The proposed changes could also prevent employers from claiming exempt status for a number of positions that have been spotlighted in FLSA litigation in the last decade, including loan officers and retail store managers.

The new regulations still face a long road ahead. Proposed changes are subject to the Administrative Procedure Act, which means the release of the proposed regulations in February 2015 will be followed by a public comment period (at least 30 days, but likely more given the impact of these changes), DOL hearings, drafting of a final rule, and approval by OIRA (limited by Executive Order to 90 days with the possibility of a single 30-day extension). Thus, in light of the average review schedule for DOL regulations (and the 18-month period for review of the 2004 FLSA regulations), the new regulations likely will not be finalized until at least the fall of 2015. And, even if the Administration is successful in getting the regulations through the process during the President's final term, there likely will be court challenges to the regulations that may delay them.

The President's Executive Actions on Immigration and Changes to the Laws Affecting Employment of High-Skilled Workers

On November 20, 2014, the President announced a series of executive actions to modify enforcement of the nation's immigration system, including measures to crack down on illegal immigration at the border, to prioritize deporting felons, and to set up a process for certain undocumented immigrants to pass a criminal background check and pay taxes in order to temporarily stay in the United States without fear of deportation.

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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Jeremy B. Merkelson
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