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Will President Obama’s New Overtime Regulations Shrink Corporate Restricted Classes?

Corporate PAC managers may soon find that the universe of employees who receive corporate PAC solicitations has unexpectedly shrunk.  In July 2015, the Department of Labor proposed new regulations that would dramatically increase the number of workers entitled to overtime wages.  The Department of Labor estimates that, under the new regulations, approximately 5 million new white collar workers could receive overtime pay.  Currently, salaried employees are not entitled to overtime pay if they perform certain duties and are paid at least $455 per week (the equivalent of $23,600 annually).  Under the proposed regulations, the duties test would remain the same but the salary threshold would increase to $921 per week/$47,892 annually.  This salary threshold would also be adjusted year-to-year, pegged at the 40th percentile of weekly earnings of full-time salaried workers.

In practice, because the FEC regulations and Fair Labor Standards Act regulations overlap to a degree, some companies take a shortcut in their legal analysis and solicit PAC contributions only from employees not entitled to overtime pay and refuse to solicit those entitled to overtime pay.  Thus, when the number of employees entitled to receive overtime pay increases, the universe of employees solicited by these corporate PACs may fall.

Legally, however, these regulations should not require companies to reduce the size of their restricted class.  While the FEC regulations look to Fair Labor Standards Act regulations for guidance in determining whether an individual’s duties place that individual in the restricted class, the FLSA’s salary cut-off on overtime payments is not relevant to this analysis.  Nonetheless, these new rules may present corporate PACs with a good opportunity to conduct a more thorough “restricted class review” to confirm that solicited employees all fall within the restricted class and to determine whether others may also be solicited.

© 2020 Covington & Burling LLPNational Law Review, Volume V, Number 307

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About this Author

Zachary Parks, Election, Political Law Attorney, Covington Burling, Law firm
Special Counsel

Zachary Parks advises corporations, trade associations, campaigns, political parties, and high-net worth individuals on their most important and challenging election and political law problems. 

At the federal level, Mr. Parks' expertise includes the Federal Election Campaign Act, the Lobbying Disclosure Act, the Ethics in Government Act, the Foreign Agents Registration Act, and the Securities and Exchange Commission’s pay-to-play rules.  He has also helped clients comply with the election and political laws of all 50 states. 

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