The Biden administration is proposing changes to the Fair Labor Standards Act that would expand nonexempt status for workers who would be entitled to overtime compensation.

On Aug. 30, the U.S. Department of Labor published a Notice of Proposed Rulemaking, or NPRM, which would require, at a minimum, that certain employees earn at least $1,059 per week ($55,068 annually) to be exempt from overtime, up from $684 per week (an over 50% increase). It also seeks to raise the threshold for “highly compensated” employees to $143,988 from $107,432 (a 34% increase).

Citing the department’s “broad authority,” the 267-page proposed rule outlines changes to the 1938 Fair Labor Standards Act, which many have complained is outdated in its language and requirements. For example, the law still has an exemption for “outside sales” that was written for workers going door to door selling products, not the new digital age. None of that is changing here.

This proposal seeks only to make sure that more workers are entitled to overtime compensation if they work more than 40 hours in a workweek.

There are several ways an employee can be properly classified as exempt from overtime, but the most common is considered the “white collar” exemption for executive, administrative and professional, or EAP, employees. Because the law is antiquated, none of the definitions for these categories actually are what the titles sound like. For example, the “administrative” exemption isn’t for a clerical employee — it’s actually the opposite – it’s for senior-level individuals who make important decisions regarding back-office operations of an organization.

For an employee to be exempt from overtime, three requirements must be satisfied:

(1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary-basis test);

(2) the amount of salary paid must meet a minimum specified amount (the salary-level test); and

(3) the employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations (the duties test).

Most employers fail to properly run this test on each exempt employee, causing employees to be misclassified and improperly compensated. The “duties” test is particularly complex and difficult for employers to understand.

Highly compensated employees who meet the threshold are not required to satisfy all of the duties requirements.

As noted by the NPRM, “The employer bears the burden of establishing the applicability of the exemption.” Much to the confusion and disappointment of employers, “job titles and job descriptions do not determine EAP exemption status, nor does merely paying an employee a salary.” The test looks at the actual work of an employee.

While employees are clamoring for more flexibility after the pandemic and seeking the option of earning compensatory time off in lieu of overtime like the government permits for itself, this rule is a doubling down on the 1938 law that fixates on a 40-hour workweek.

DOL Acting Secretary Julie Su said of the new rule, “For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones.”

Highly compensated employees who meet the threshold are not required to satisfy all of the duties requirements.

As noted by the NPRM, “The employer bears the burden of establishing the applicability of the exemption.” Much to the confusion and disappointment of employers, “job titles and job descriptions do not determine EAP exemption status, nor does merely paying an employee a salary.” The test looks at the actual work of an employee.

While employees are clamoring for more flexibility after the pandemic and seeking the option of earning compensatory time off in lieu of overtime like the government permits for itself, this rule is a doubling down on the 1938 law that fixates on a 40-hour workweek.

DOL Acting Secretary Julie Su said of the new rule, “For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones.”

Employers should immediately assess their workforce for exempt employees earning between $684 and $1,059/week and those exempt employees earning between $107,432 per year and $143,988 per year to determine the impact on their business if the proposed rule is passed.

The comment period is open for 60 days from Aug. 30. Information on the rule and how to comment can be found at https://www.dol.gov/agencies/whd/overtime/2019/faq.