The White Collar Exemption Situation (or nightmare if you so choose!)

man calculating finances

Well, it’s been a long time since I’ve written a legislatively motivated blog! However, I feel VERY strongly that you don’t know about this pending legislation that could cost you a great deal in payroll dollars! Perhaps I’m being dramatic calling it a nightmare but if that got your attention, then my goal is accomplished!

Let’s have a quick review on “exemptions”: These are exceptions or exemptions to the Fair Labor Standard Act overtime requirements. There are several “basic” exemption categories. [1]

The difference between exempt and non-exempt? Exempt employees receive the same wages every pay (regardless of whether they work 1 hour or 60 hours during the week;) they are NOT eligible for overtime. Being classified as exempt is based on the TASKS of the job – not the title. The Fair Labor Standards Act has even provided checklists that you can use to evaluate your job descriptions. (Email us and we’ll gladly send you a set – [email protected].)

Our society has long viewed “exempt” as a promotion and a move away from a “blue collar” job. An exempt status enables an employee to have better control over work-life balance by having the ability to “flex” their work schedule to attend an afternoon school program or visit a doctor if/when they, or a family member, are ill. All good things, right?

The VERY FIRST test for each level is called the “salary” test. At the present time, the minimum is $455.00 per week. Well, my friends…

That is increasing, sooner than you think. The Department of Labor has forwarded recommendations for changes to this salary test to the OMB (Office of Management and Budget) – the last step to becoming law! The new salary test is $921.00 per week or $47,892.00 annually. That is in excess of a 100% increase! When’s the last time YOU received a 100% increase? I would venture to guess ~ never. In addition to the ridiculous notion of a 100% increase:

  • Confusion already exists over the salary tests versus the tasks of the job – increasing the “salary” test will further complicate the issue – which wins out? The duties or the salary?
  • The change will actually minimize and/or eliminate promotions in many small businesses. Many employees in small organizations MUST demonstrate independent thought (another criteria in the “tests”) on a daily basis but the business can in no way support a minimum salary of almost $48,000.
  • The proposed rate is higher than the Federal Wage rates for individuals with a Masters’ Degree [2] – will the Federal Government be applying the same “tests” that will be imposed on private sector?
  • Arguments are being made that the wage cost can be passed along to the consumer – which, in turn, will erode the wage increase that was just provided to the worker.

In just one of our clients’, after an average of 7 years of being an “exempt, skilled professional,” employees will now be required to punch a time clock, including for their breaks and lunches as well as schedule vacation and personal time if they need to visit the doctor, dentist or attend a school event. How have we enriched/improved their lives? And this is just one, small example.

I’m sure you have examples as well of how this will impact YOU and or your business.  That’s where you can help – you CAN make a difference. Reach out to your government. In PA, Senator Toomey and Senator Casey have been elected to represent MY best interests. Please reach out to your Senators – write, call, email – you can locate them here. And, to make things even easier for you, I’ve drafted the following Sample Letter that you are more than welcome to use! “Sample White Collar Letter”

Boy, I don’t often ask, but PLEASE reach out – use your voice – be heard – make a difference! (Don’t forget to also reach out to your local Chambers of Commerce, State Chambers and the US Chamber as well – they’ll all be glad to help!)

[2] US Chamber Comments on RIN 1235-AA11, pg. 26

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