Restoring Overtime Pay For Working Americans Act: Senate Democrats Join President Obama’s War On FLSA Exemptions

Yesterday, Senate Democrats introduced a bill cited as the "Restoring Overtime Pay for Working Americans Act" ("the Act"), which would amend the Fair Labor Standards Act ("FLSA") to make it more difficult for employers to classify employees as exempt and impose penalties on employers for failing to comply with the FLSA's record-keeping provisions. This action by the Senate Democrats provides a second front to the war on exemptions declared by President Obama in March, when the White House directed the U.S. Department of Labor ("DOL") to "modernize and streamline the existing overtime regulations" as they pertain to the application of exemptions, which we reported here.

The Act proposes the following:

(1) Increased Salary Basis.

For executive, administrative, and professional exempt employees, the weekly salary would increase from $455 to $1,090 over a 3-year period. Specifically, the weekly salary would increase to $665 (1 year following enactment), $865 (2 years following enactment), and $1,090 (3 years following enactment). At 4 years after enactment, and every succeeding year, the weekly salary would increase by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

For highly compensated exempt employees, the annual compensation would increase from $100,000 to $125,000 over a 3-year period. Specifically, the compensation would increase to $108,000 (1 year following enactment), $116,000 (2 years following enactment), and $125,000 (3 years following enactment). At 4 years after enactment, and every succeeding year, the weekly salary would increase by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

(2) Cannot Spend More Than 50% of Work Hours on Duties That Are Not Exempt.

For executive, administrative, and professional exempt employees, the Act would require that an employee "shall not spend more than 50% of such employee's work hours in a workweek on duties that are not exempt . . . ."

If the Act becomes law, it will be interesting to see whether it has any meaningful impact on the application of exemptions to employees who contemporaneously perform exempt duties while spending time on activities that are not exempt. For instance, Courts have long recognized that exempt employees, such as store managers and restaurant managers, may properly be classified as exempt regardless of the time spent on duties that were not exempt. The...