RIN Data

The Department proposes to update the regulations governing which executive, administrative, and professional employees (white collar workers) are entitled to the Fair Labor Standards Act’s minimum wage and overtime pay protections. Key provisions of the proposed rule include: (1) setting the standard salary level required for exemption at the 40^th percentile of weekly earnings for full-time salaried workers (projected to be $970 per week, or $50,440 annually, in 2016); (2) increasing the total annual compensation requirement needed to exempt highly compensated employees to the annualized value of the 90^th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and (3) establishing a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption. The Department last updated these regulations in 2004, which, among other items, set the standard salary level at not less than $455 per week.

Statement of Need:

On March 13, 2014, President Obama signed a Presidential Memorandum directing the Department to update the regulations defining which white collar workers are protected by the FLSA's minimum wage and overtime standards. 79 FR 18737 (Apr. 3, 2014). Consistent with the President's goal of ensuring workers are paid a fair day's pay for a fair day's work, the memorandum instructed the Department to look for ways to modernize and simplify the regulations while ensuring that the FLSA's intended overtime protections are fully implemented.

Summary of the Legal Basis:

There are a number of exemptions from the FLSA's minimum wage and overtime requirements. Section 13(a)(1) of the FLSA, codified at 29 U.S.C. 213(a)(1), exempts from both minimum wage and overtime protection "any employee employed in a bona fide executive, administrative, or professional capacity . . . or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary, subject to the provisions of [the Administrative Procedure Act] . . .)." The FLSA does not define the terms "executive,'' "administrative,'' "professional,'" or "outside salesman.'' Pursuant to Congress' grant of rulemaking authority, the Department in 1938 issued the first regulations at 29 CFR part 541, defining the scope of the section 13(a)(1) exemptions. Because Congress explicitly delegated to the Secretary of Labor the power to define and delimit the specific terms of the exemptions through notice and comment rulemaking, the regulations so issued have the binding effect of law. See Batterton v. Francis, 432 U.S. 416, 425 n.9 (1977).

Alternatives:

Alternatives were listed in the Department’s NPRM published in the Federal Register July 6, 2015 (80 FR 38516).

Anticipated Costs and Benefits:

Detailed analysis of the costs and benefits is included in the Department’s NPRM published in the Federal Register July 6, 2015 (80 FR 38516).

Risks:

Risks were discussed in the NPRM published in the Federal Register July 6, 2015 (80 FR 38516).