The issue of exempt v. non-exempt has reared its ugly head once more. The Department of Labor (Federal) last updated its regulations related to the primary FLSA exemptions (administrative, executive, and professional employees) in 2004. Now, recent activities by the Department of Labor and Office of Information and Regulatory Affairs indicate that the Department of Labor will soon take action to create much stricter guidelines.
Currently, the salary test for these employees requires a minimum annual salary of $23,660 in order to have any chance of qualifying for one of these exemptions. Pro-union and other pro-employee groups are pushing to move the salary test minimum to $42,000 or higher. This would raise the minimum for California employers, as the current California minimum is $37,440 annually (rising to $41,600 in 2016).
Here’s the kicker. The expectation is the Department of Labor will seek to modify the duties test such that employers will have to prove that employees who are exempt from overtime are spending more than 50% of their time performing exempt duties in order to be considered exempt. Currently, under federal law, the employer need only prove that exempt duties constitute the primary (key) duties of the employer’s position. If such a change is implemented, federal law would be more consistent with California law with respect to the duties test.
Finally, many pro-employee and union groups have criticized the definition of the administrative exemption as being too broad and too vague. With this in mind, it would not be a surprise if the Department of Labor narrows the definition of administrative employee thereby making it more difficult for employers to utilize this exemption and restricting its applicability to employees who perform high level back office administrative functions that are entirely separate from the employer’s main business focus. If such a proposal were enacted, the employer would have to prove that the administrative employee is not a production employee who is directly involved in performing the service or making the product that the employer provides to its customers. This would have a material impact and substantially minimize the applicability of the administrative exemption. Stay tuned!