The U.S. Department of Labor has adopted a new final rule increasing white collar exemption salary rates, which will take effect on January 1, 2020. Click here to read our client advisory about the new rule.
On Thursday, President Obama will instruct the U.S. Department of Labor to revise its overtime regulations implementing the Fair Labor Standards Act. The President’s plan will force employers to pay more overtime to millions of workers previously exempt under the “white collar” exemptions. The plan would make this change by increasing the salary threshold for exempt employees, currently at $455 per week. Additionally, the President will attempt to change the “primary” duty rules that define workers’ exemptions. The public will be allowed to comment on any proposed changes to the regulations, which may help scale-down the President’s proposal.
By Andy Volin
The administrative exemption is one of the major “white collar” exemptions from overtime pay under the Fair Labor Standards Act (“FLSA”). Recently, the Sixth Circuit affirmed a trial verdict that fraud investigators met the exemption requirements, both under the FLSA and similar state law. Foster v. Nationwide Mut. Ins. Co., No. 12-3107 (6th Cir. Mar. 21, 2013). The dispute focused on whether the primary duties of the investigators (a) related to the general business operations of the company and (b) required the exercise of discretion and independent judgment. The trial court heard evidence about the investigators’ specific duties and concluded they were not involved in selling insurance policies, but in the general business operations of the company, and, although they were subject to procedures, their ultimate task was to determine whether a claim was valid. Consequently, the trial court found the exemption applied. The Court of Appeals agreed: determining the truth requires the exercise of discretion and independent judgment.
The application of an FLSA exemption depends on the facts of the specific employees’ duties. Here the parties had to go to trial over the primary duties of insurance investigators. The ruling applies to other employers’ investigators only if the employees perform the same duties. The exemption probably doesn’t apply to employees who always go by the book.