Obama Administration to Propose New Overtime Rules

Hospitality employers may soon learn that their currently exempt front-line managers and supervisors must be paid overtime. Yesterday, President Obama signed a Presidential Memorandum directing the Secretary of Labor to begin the regulatory process to revise the Fair Labor Standards Act's white collar exemptions from minimum wage and overtime. Based on the President's remarks, any regulatory proposal will represent a fundamental change. Although the President mentioned that there will be some efforts at clarification and simplification, it is clear that the end goal for these regulatory revisions will be to dramatically decrease the number of employees for whom employers may claim an overtime exemption.

Although the details are still fuzzy, it appears that the Administration will seek to raise the salary level for the exemption to apply. A New York Times article references salary numbers as high as $984 per week. In addition, statements about the regulatory activity indicate that the Administration plans to adjust the primary duty test presumably to implement a hard 50% limitation on work deemed non-exempt, similar to California. It is likely that changes to the duties tests will also be proposed. In particular, the Administration may seek to change the test for the administrative exemption, where previous sub-regulatory efforts have thus far fallen flat.

A significant increase in the required salary and the elimination of the exemption for an employee who manages while contemporaneously performing other duties means that hospitality employers may no longer be able to claim an exemption for their assistant managers. In many cases, general managers may also become non-exempt without a change in job duties or a substantial raise.

We will know much more when the regulation is actually proposed later this year. Once it is proposed, the public will have the opportunity to provide comments on the proposal, which the DOL will have to review and analyze prior to any revisions becoming effective, likely in 2015 or later.

Join us for our webinar this Tuesday, March 18th at 1pm Eastern. Click here to register.