Changes Afoot for the White Collar Overtime Exemption

March 19, 2015

In March of last year, the Obama administration directed the Department of Labor to propose new rules that would make more workers eligible for overtime pay. The original target date was last November, but was postponed until February 2015 and now appears to be March or April. This is not a situation of infinite delay, and there is every reason to suspect that new proposed rules are imminent.

Let’s back up though. The Fair Labor Standards Act requires employers to pay one and a half times the regular rate of pay to hourly employees who work more than 40 hours per week and who have no vested interest in the success of the business. The latter is evaluated in two ways: how much the worker earns and whether the job requires an exercise of executive, administrative, or professional discretion.

What Employees Are Exempt?

The problem is that the exemption criteria do not deal adequately with the new, swampy middle of artificially inflated job titles – those who have no realistic prospect at climbing the economic ladder with more time at the fryer and a ServSafe certification, managerial title notwithstanding. Even they can easily be replaced in an afternoon.

A wide range of suggestions has emerged. Some involve changes to the overtime salary threshold. Others look at the nature of the duties performed. Whatever proposal emerges will be subject to a comment and review period that will probably move implementation into the late summer or fall at the earliest. The changes will surely affect low-wage managerial and other employees. Just as surely they will become an element that employers consider in defining job duties and crafting compensation structures.

Erosion by Inflation

The current federal salary threshold for determining which employees are exempt from the overtime provisions of the FLSA is $23,660, or $455 per week for a 40-hour week. This limit was last updated in 2004. Because of inflation, most salaried workers are now excluded from overtime eligibility. According to the Economic Policy Institute, only 11 percent now fall under this limit, compared with 65 percent in 1975.

This is below today’s poverty line for a worker supporting a family of four and is likely one of the causes of the chronically slow growth in the living standards of middle income employees.

Many argue that even this stark number does not capture the changing nature of employment, with the growth in temporary employment, part time work, two earner families, multiple jobs and the rise of independent contracting. These changes may give employers flexibility, but often make the employee’s situation more tenuous. For employees in this situation, changes in overtime rules miss the mark.

Some states, like California and New York, have tried to address this situation by raising the state threshold. In California the overtime laws cover employees who make less than $640 for a 40 hour week, rising to $800 in 2016.  In New York, the threshold is $600 per 40 hour week, rising to $675 in 2016.

What Should the Earnings Threshold Be?

The expectation among experts is that the DOL income threshold will come in at a number between $42,000 and $52,000 per year. The EPI estimates that the lower number would make an additional 3.5 million workers eligible for overtime while the higher one would bring an additional 6.1 million workers into the fold. Advocates for an increase, like the National Employment Law Project, estimate that a threshold of $51,168, or $984 a week would extend coverage to approximately 47 percent of salaried workers.

The Labor Department’s own chief economist has, in the past, advocated for a floor of $58,000, which would cover an estimated 54 percent of workers. Nick Hanauer, a progressive venture capitalist, has proposed a threshold of $69,000.

Even beyond arguments about the earnings threshold, commentators differ about how the increase should be implemented, including whether it should be phased in, as increases to the minimum wage have been in some states. The U.S. Chamber of Commerce, in its opposition to raising the compensation level, argues that the DOL should apply geographically specific thresholds.

Exempt Duties Issue

The other element in the existing standard for overtime eligibility concerns the nature of the duties performed. Changes proposed by the Obama administration could also alter the way in which the time spent in exempt activities is counted.

Rather than looking at the issue of whether an employee’s primary responsibilities are managerial, supervisory or administrative, the new guidance might require a tally of how time is actually spent. To be exempt from overtime protections, the employee would then have to spend at least 51 percent of his or her time performing exempt activities.

Approval Process

Any proposed changes to the overtime regulations are subject to the federal Administrative Procedure Act’s rulemaking process. The steps in this process, even at its fastest, can be quite time consuming and will include:

  • The issuance by the DOL of a notice of proposed rulemaking,
  • Followed by a public comment period and testimony, likely resulting in some revision of the proposed regulations,
  • After which the DOL will submit a final version of revised regulations to the Office of Management and Budget’s Office of Information and Regulatory Affairs,
  • OIRA will then conduct a final review, approve the text of the regulation and publish it in the Federal Register.

Even with a short comment period and a quick turnaround on a final rule, the DOL is unlikely to have any new regulation in place before the late summer 2015. The length of the process, however, does allow for input on the part of employers who fear the economic impact of a raised threshold and new standards for evaluating exempt duties. Affected parties are also likely to file legal challenges to any revisions, which could potentially delay their implementation further. It is an open question about whether new rules could be in place before a new administration rakes over.

Additional Effects on Employees

Although eligibility for overtime may boost employees’ wages, the reclassification of some workers as hourly rather than salaried may cost others some work schedule flexibility.  The extent to which this might have a detrimental effect on employees may depend on the particulars of income bracket.

Effect on Employers

If wage and hour regulations are updated, the implications could be significant for employers, but somewhat difficult to predict because of the range of possible situations and responses.

If employers find that certain positions no longer meet the standards set out in the white collar exemption, they will be required to either

  • readjust duties and compensations to re-qualify the employee or
  • reclassify the position as non-exempt, track hours and pay at time-and-half for hours above 40 in the workweek.

Others may respond with layoffs, reductions in hours, outside contracting or renewed interest in automation.


The penalties for overtime violations can be daunting, If an employee sues for back overtime under the FLSA, penalties may include payment of back overtime or liquidated damages in an amount equal to the back overtime, and the employee’s attorney’s fees.

If the DOL brings an action, the employer may also be liable for a fine of $1,000 per violation. Since the DOL counts each paycheck that does not contain overtime as a violation, this can mean $1,000 per pay period. A willful violation can lead to a criminal penalty of $10,000 and up to six months in jail.

Both the DOL and state wage and hour agencies have been vigorously prosecuting class action claims, which easily can run into millions of dollars since they cover many employees and can go back for the prior three years.

Changes in the FLSA overtime rules will likely be proposed in the next month.  They are intended to make many more employees eligible for overtime pay and could have major consequences for employers.

Even before they are finalized, employers can take a proactive steps by reviewing job descriptions and classifications to make sure that they accurately reflect  the employee’s role in the business and duties performed. If nothing else, this will  protect the business from liability for overtime violations, and may make any revisions required by new regulations easier to accomplish.

What the regulations will look like after public comment and the litigation that is nearly certain to follow is hard to guess, but they will certainly improve the lot of at least some workers, possibly many more.

The larger economic effect is more difficult to assess because of range of possible responses on the part of employers. Like the impact of the Affordable Care Act, it may take several years for consequences to become clear because of the fundamental changes in the nature of employment.


Anne Wallace is a New York lawyer who writes extensively on legal and business issues. She also teaches law and business writing at the college and professional level. Anne graduated from Fordham Law School and Wellesley College.

Get Business Legal Updates

Please provide your full name.
Please provide a valid email address.
We respect your privacy, and we will never share your information. Unsubscribe at any time.

Related Publications

Nasir and Matt discuss the investigative report concerning nail salons andthe abusivetreatmentthat many workers are experiencing.

May 11, 2015

The guys kick off the week by explaining the issues with employers requiring their employees to pay fortheir own uniforms.

February 9, 2015

Employment is an economic exchange, regulated by both law and market forces.  As a threshold matter, the payment arrangements you make with your employees must comply with the minimum wage and overtime requirements of the Fair Labor Standards Act, state law and local ordinances.   Beyond that, however, the question is what the market will bear. …

May 14, 2014
Legally Sound Smart Business cover art

Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
Apple Podcast badge
Google Podcast badge
Spotify Podcast badge

Latest Episodes

November 21, 2023

In this episode, Nasir Pasha and Matt Staub explore the legal implications of Artificial Intelligence in the business world. They delve into the most talked-about issue of 2023: AI and its impact on the legal landscape. Although AI isn’t necessarily a new topic, it has many unanswered questions in the legal world. Nasir and Matt…

July 12, 2023

In this episode, Attorney Nasir Pasha and Attorney Matt Staub delve deep into the complexities of mass layoffs and offer valuable insights, real-life examples, and practical advice to employers grappling with the aftermath of such challenging situations. Nasir and Matt emphasize the critical importance of effective communication when executing mass layoffs. They stress the need…

January 9, 2023

As the COVID-19 pandemic swept across the globe, businesses scrambled to adapt to the new reality it presented. In this blog post, we dive into the case of Goldman Sachs, a financial services giant, to examine their response to the crisis and the lessons other businesses can learn from their return-to-office strategy. From prioritizing employee…

October 28, 2022

Full Podcast Transcript NASIR: Finally, my two favorite worlds have collided – both the law and the chess – right here at Memorial Park in Houston, Texas. Windy day. We have some background noise – ambient noise. What are the two worlds that collided? Well, Hans Neimann has sued Magnus Carlsen for defamation in one…

September 26, 2022

Through a five-round championship bout, Matt travels to Texas from California to determine which state is better for business. Will it be a knockout with a clear winner or will it go to the scorecards?

July 7, 2022

Whether you are buying or selling a business, the transaction goes through the same steps. However, they are viewed from different perspectives. Sellers may not want to fully disclose all the blind spots while Buyers will want otherwise. Nasir and Matt battle it out in this Buyer vs. Seller to determine who has the advantage!…

May 12, 2022

When it comes to Restrictive Covenants, employers are fighting to keep their company safe while employees may use them to their advantage. Keep listening to find out if the Employer or the Employee wins this battle. Round 1: Trade Secrets A company’s trade secrets encompass a whole range of information and are one of the…

February 14, 2022

The Supreme Court rejected the nation’s vaccine mandate. Businesses with 100 or more employees are NOT required to have their employees vaccinated or go through weekly testings. However, this policy remains in effect for health care facilities. In this episode of Legally Sound | Smart Business, the team sat down to discuss their thoughts on this ruling.

December 1, 2021

In this episode of Legally Sound | Smart Business by Pasha Law PC, Nasir and Matt cover the Business of Healthcare. There is more to the healthcare industry than just doctors and nurses. Many Americans have health insurance to cover their yearly needs, but most Americans are not aware of what really goes on behind…

October 12, 2021

In our latest episode, Nasir and Matt are covering the legal issues on Social Media. The average person spends most of their day on social media, whether they are scrolling for hours or publishing their own content. However, just because you publish your own content on Instagram does not equate to you owning that image….

September 28, 2021

What is a Non-Disclosure Agreement, and when do I need one? In this episode, Nasir and Matt shares why you need to use Non-Disclosure Agreements, basic facts about NDA’s, and discuss about the infamous Jenner-Woods story. Having the right Non-Disclosure Agreement in place not only protects you and your business, but it also makes the…

June 16, 2021

Covered in this episode of Legally Sound Smart Business are some typical business mistakes blunders small businesses often make and how to avoid them. Blunder #1: Copying and pasting agreements It may sound like a good idea at the time, but this blunder comes with hidden pitfalls. Having an attorney draft terms that are specific…

February 4, 2021

How you terminate an employee can make the difference between a graceful transition to avoidable negative outcomes like a dramatic exit or even a lawsuit. We gathered a panel of experts and asked them – is there a “right way” to fire an employee? We would like to thank our guests for this episode: Amr…

December 2, 2020

The COVID-19 pandemic has turned nearly every aspect of life on its head, and that certainly holds true for the business world. In this episode, Matt and Nasir explain how the early days of the pandemic felt like the Wild West and how the shifting legal playing field left a lot open to interpretation and…

November 16, 2020

After plenty of ups and downs, our buyer has finally closed on the purchase of their business. While we’re marking this down in the ‘wins’ column, it never hurts to review the game tape. In this final episode, our hosts, Matt Staub and Nasir Pasha, return to the deal almost a year later to reflect…

September 15, 2020

The ink is drying on the signature line and things are looking great for our buyer. After so much hard work, the finish line is in sight and the cheering within ear shot.   Though the landlord is still serving friction, things seem safe to move forward and for now, our buyer will be keeping…

July 31, 2020

Though things are coming along well, the journey would not be interesting if it was purely smooth sailing. After our buyer opens escrow, they are forced to push the closing date back when suddenly a letter from an attorney was received claiming the business, we are buying has a trade mark on the name!  Now…

June 12, 2020

With frustration at an all-time high and professionalism at an all-time low, our friend the Buyer has “had it” with the Seller and quite frankly their lack of knowledge. At present our Buyer is rightfully concerned that the latest misstep from our loose-lipped Seller will threaten not only the entire operation of the businesses but…

May 11, 2020

As we go deeper into the buying process, we start to uncover more challenges from our seller and encounter some of the wrenches they are tossing our way. When we last left off in episode three our team was knee deep in due diligence for our buyer, had already penned and signed the Letter of…

April 4, 2020

One word–interloper! When a new mysterious broker enters the transaction and starts to kick up dust, Nasir and Matt take the reins. The seller signed off on the letter of intent (see episode 2), yet this “business broker” serves only friction and challenges by refusing to send financials, whilst demanding more of a firm commitment…

April 4, 2020

Just as most stories and deals start out, everyone is optimistic, idealistic and full of hope for clear skies. It’s a perfect outlook with a perfect setup for the ups and downs yet to come. Peek further behind the curtain and into the first steps of buying a business: the letter of intent. After the…

April 4, 2020

When a savvy buyer hears opportunity knocking to purchase a prime positioned business, she decides not to go it alone and taps in the professionals to help navigate what could potentially be a fruitful acquisition. “Behind the Buy” is a truly rare and exclusive peak into the actual process, dangers, pitfalls and achievements, that can…

August 7, 2019

GrubHub is subject to two “matters of controversy” that have likely become common knowledge to business owners: “fake” orders and unfriendly microsites.

May 28, 2019

In this podcast episode, Matt and Nasir breakdown the legal issues of the subscription industry’s business on the internet. Resources A good 50-state survey for data breach notifications as of July 2018. California Auto-Renewal Law (July 2018) Privacy Policies Law by State Why Users of Ashley Madison May Not Sue for Data Breach [e210] Ultimate…

March 12, 2019

In recording this episode’s topic on the business buying process, Matt’s metaphor, in comparing the process to getting married probably went too far, but they do resemble one another. Listen to the episode for legal advice on buying a business.

December 3, 2018

Nasir and Matt return to discuss the different options available to companies looking to raise funds through general solicitation and crowdfunding. They discuss the rules associated with the various offerings under SEC regulations and state laws, as well as more informal arrangements. The two also discuss the intriguing story about a couple who raised over…

July 24, 2018

Flight Sim Labs, a software add-on creator for flight simulators, stepped into a PR disaster and possibly some substantial legal issues when it allegedly included a Trojan horse of sorts as malware to combat pirating of its $100 Airbus A320 software. The hidden test.exe file triggered anti-virus software for good reason as it was actually…

April 17, 2018

Attorneys Matt Staub and Nasir Pasha examine Mark Zuckerberg’s congressional hearings about the state of Facebook. The two also discuss Cambridge Analytica and the series of events that led to the congressional hearings, the former and current versions of Facebook’s Terms of Service, and how businesses should be handling data privacy. Full Podcast Transcript NASIR:…

March 10, 2018

The Trump presidency has led to a major increase in ICE immigration enforcement. It’s critical for business owners to both comply with and know their rights when it comes to an ICE audit or raid. Nasir, Matt, and Pasha Law attorney Karen McConville discuss how businesses can prepare for potential ICE action and how to…

February 5, 2018

New years always bring new laws. Effective January 1, 2018, California has made general contractors jointly liable for the unpaid wages, fringe benefits, and other benefit payments of a subcontractor. Nasir and Matt discuss who the new law applies to and how this affects all tiers in the general contractor-subcontractor relationship. Click here to learn…

January 2, 2018

With a seemingly endless amount of new mattress options becoming available, it is unsurprising that the market has become increasingly aggressive. As companies invest in more innovative solutions to get in front of customers, review sites, blogs and YouTube videos have moved to the forefront of how customers are deciding on their mattresses and how…

December 7, 2017

In recent months explosive amounts of high profile allegations of sexual harassment, assault, and varying acts of inappropriate behavior have transcended every sector of our professional world. With a deluge from Hollywood and politics, and the private workforce, accusations have inundated our feeds and mass media. This harassment watershed has not only been felt within…

November 16, 2017

If you are not familiar with the EB-5 program started in 1990 to give green cards to certain qualified investors in the United States, then you may not have been alone a few years ago. Currently, the EB-5 program has since exploded since its inception and now hits its quotas consistently each year. The program…

October 10, 2017

Government requests come in multiple forms. They can come in as requests for client information or even in the form of investigating your company or your employees. Requests for Client Information General Rule to Follow Without understanding the nuances of criminal and constitutional law and having to cite Supreme Court cases, any government requests for…

August 24, 2017

Nasir and Matt suit up to talk about everything pertaining to employee dress codes. They discuss the Federal laws that govern many rules for employers, as well as state specific nuances in California and other states. The two also emphasize the difficulty in identifyingreligious expression in dress and appearance, how gender-related dress codes have evolved…

June 28, 2017

Nasir and Matt discuss the life cycle of a negative online review. They talk about how businesses should properly respond, how to determine if the review is defamatory, the options available to seek removal of the review, how to identify anonymous reviewers, whether businesses can require clients to agree not to write negative reviews, and…

June 7, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Mattbreak down social media marketing withguests Tyler Sickmeyer and Kyle Weberof Fidelitas Development. They first discuss contests and promotionsand talk about where social media promotions can go wrong,when businesses are actually running an illegal lottery, and the importance of a soundterms and conditions. Next, they…

April 3, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Matt go in depth with the subscription box business. They discuss where subscription box companies have gone wrong(4:30), the importance of a specifically tailored terms and conditions(6:30), how to structure return policies (11:45), product liability concerns (14:45),the offensive and defensive side of intellectual property (19:00),…

February 1, 2017

Nasir and Matt discuss the suit against Apple that resultedfrom a car crashed caused by the use of FaceTime while driving. They also discuss howforeseeable use of apps can increase liability for companies. Full Podcast Transcript NASIR: Hi and welcome to Legally Sound Smart Business! I’m Nasir Pasha. MATT: And I’m Matt Staub. Two attorneys…

January 5, 2017

The guys kick in the new year by first discussing Cinnabon’s portrayal of Carrie Fisher as Princess Leia soon after her death, as well as other gaffes involving Prince and David Bowie. They alsotalk about right of publicity claims companies could be held liable for based on using someone’s name or likeness for commercial gain.

December 22, 2016

Nasir and Matt discuss the recent incidentat a Victoria’s Secret store where the store manager kicked out all black women after one black woman was caught shoplifting. They then each present dueling steps businesses should take when employees are accused of harassment.

December 8, 2016

Nasir and Matt return to talk about the different types of clients that may have outstanding invoices and how businesses can convert unpaid bills to getting paid.

November 10, 2016

After a long break, Nasir and Matt are back to discuss a Milwaukee frozen custard stand that is now revising it’s English only policy for employees. The guys also discuss how similar policies could be grounds for discrimination and what employers can do to revise their policies.

October 6, 2016

The guys discuss the new California law that allows actors to request the removal of their date of birth and birthdays on their IMDB page and why they think the law won’t last. They also discuss how age discrimination claims arise for business owner.

September 29, 2016

Nasir and Matt discuss the racial discrimination claims surroundingAirbnb and how it’s handled the situation. They also discuss some practical tips for businesses experiencing similar issues.

September 8, 2016

Nasir and Matt discuss whyAmazon seller accounts are getting suspended and banned without notice and how business owners can rectify this situation through a Corrective Action Plan.

August 25, 2016

Nasir and Matt talk about the accusations surroundingfashion giant Zararipping off the designs of independent artists like Tuesday Bassen and howsmaller companies can battle the industry giants.

August 18, 2016

Nasir and Matt discuss Brave Software’s ad replacing technology that has caught the eye of almost every national newspaper and has a potential copyright infringement claim looming. They also welcome digital marketing expert Matt Michaelree to speak on the specifics of what Brave is attempting to do and whether it has the answers moving forward.

July 28, 2016

Nasir and Matt discuss the sexual harassment lawsuit filed by Gretchen Carlson against Fox CEO Roger Ailes. They also talk aboutthe importance of sexual harassment training and properly handling such allegations in the office.

July 15, 2016

Nasir and Matt talk about the changes at Starbucks that have led to many disgruntled employees and customers.

We represent businesses.
That’s all we do.

Oh, and we love it.

We love our work. We love reviewing that lease for your new location. We thrive on closing that acquisition that nearly fell through. We’re fulfilled when we structure a business to grow, raise capital, and be legally protected.

We focus on developing close relationships with our clients by being like business partners. A partner who provides essential, personalized, proactive legal support.

We do all of this without utilizing the traditional billable hour model. You pay for the value we bring, not the time spent on calls, emails, and meetings.

Our team is made up of attorneys and staff that share these values and we are retained by clients who want the same.

Pasha Law PC operates in the states of California, Illinois, New York, and Texas.

Meet Our Team

Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

Learn More