The Department of Labor issued its long-awaited proposed FLSA salary regulations today and, as many feared, they will have a massive impact on American businesses, more than doubling the salary companies must pay their employees to qualify for exempt status from overtime. The current minimum salary for exemption is $455 per week ($23,660 annually). The newly proposed regulations would increase the minimum required salary to a projected $970 per week ($50,440 annually). Although the proposed regulations, issued at President Obama’s request to the DOL to “modernize and streamline” the FLSA exemption regulations, are subject to public comment for a period of 60 days, it is unlikely that they will change significantly as a result of public comment (which is expected to be extensive and intense). The only silver lining in the proposed regulations is that the DOL did not propose alterations to the “duties” tests for exemption, leaving the 2004 requirements in place. The DOL does suggest, however, that changes to the duties test may also be forthcoming.
The DOL projects that the changes will result in the loss of exempt status for 4.6 million workers, absent a significant pay raise for them, and will have a direct cost to U.S. employers of upwards of $250 million in year one. The employers likely to be hit the hardest: retail, hospitality and food service. The day of the $10 Big Mac is likely upon us.