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The Presidential Directive to Modify White-Collar Exemptions

Frequently Asked Questions (FAQ's)

Q: What just happened?

A: Last Thursday, President Obama directed the Department of Labor to revisit the so-called white-collar exemptions (e.g. "executive," "administrative," " professional," "outside sales"). You may recall that individuals meeting these exemptions need not be paid overtime, or minimum wage for that matter. You may also recall that the Bush administration updated, and simplified, these exemptions in 2004.

The President's proposal is to revisit both the salary level and duties test for each exemption. Expectations are that the salary level could increase from its current rate of $455/week to more than $900/week, and that, for example, employees must perform a minimum percentage of “executive” work in order to qualify for the "executive" exemption.

All told, this means that employees currently categorized as exempt may lose that designation and qualify for overtime for all hours worked over 40 hours per week. Some say that the number of workers eligible for overtime pay may increase by five million and, as you might imagine, the amount of overtime paid by an exponent of five million. Do you have any employees, currently treated as exempt, who may be affected by these contemplated changes?

Q: When will the changes take effect?

A: The President's directive is that the Department of Labor start the rule-making process. While certainly subject to legal challenge, the Executive branch’s rulemaking authority is well-established. That said, this process could take as long as two years. If not completed by then, the next administration will no doubt have something to say on the subject.

Q: How does this affect me and my business?

A: Coupled with the increase in “misclassification” litigation and enforcement (see our previous post on this issue), now is the perfect time to conduct an internal audit of your various employee classifications and, if necessary, prepare for a transition in their compensation and hours. Pay particular attention to employees classified as “executive,” “administrative,” or “professional” with salaries above $455/week but below $900/week. These are the employees who may no longer be exempt under the new law. Do they work overtime?

Q: How does this intersect with Wisconsin law on the subject?

Employers must comply with both state and federal law. With respect to salary, the federal law is more stringent – meaning that the directive could have significant ramifications for Wisconsin employers.

Please contact Kris at or 414-446-8800 should you have any questions or like some guidance with respect to your audit.