This year we have seen an unprecedented exercise of federal and state Executive Branch power to unilaterally increase private sector employee wages and other compensation.  These measures portend a fundamental change the role of the Executive Branch in the labor market.

FLSA Exempt Employee Regulations

On July 6, 2015, at President Obama’s direction, the United States Department of Labor published proposed regulations under the Fair Labor Standards Act (“FLSA”) to “update the salary level to ensure that the FLSA’s intended overtime protections are fully implemented, and to simplify the identification of nonexempt employees, thus making the EAP [Executive, Administrative and Professional] exemption easier for employers and workers to understand.”  (Emphasis added.)  Any government agency’s action to “simplify” a legal requirement warrants extreme caution.  In this case, the DOL has “simplified” the FLSA’s most common exemptions by effectively eliminating them for many employees.

The regulations proposed by the DOL more than double the salary threshold for the traditional FLSA “white-collar” exemptions by increasing the minimum weekly salary from $455 to “the 40th percentile of weekly earnings for full-time salaried workers.”  If the rule is adopted as a final regulation, the DOL states that the minimum salary for 2016 “may be about $970 a week, or $50,440 a year.”  The DOL has proposed a similar change in the minimum salary for the “highly-compensated employee” exemption, increasing the threshold from $100,000 annually to “the 90th percentile of earnings for full-time salaried workers.”  If adopted, the DOL estimates the new minimum will be $122,148 annually (an increase of more than 22%).  Finally, the DOL’s proposal not only calls for significant increases in the minimum salary requirements, but also calls for an unprecedented annual escalator that increases the minimum salary each year.  This “simplicity” will, at a minimum, require employers to annually review each exempt employee’s salary to insure continuing compliance with the FLSA.

- coming soon - 
What’s (Going) Up with Employee Pay? Part II: New York's Minimum Wage