After a long wait, the US Department of Labor yesterday issued its proposed overtime rule raising the salary basis threshold for exempt employees from $23,660 to $35,308 per year or to $679 per week. Employers with employees classified as exempt under the Fair Labor Standards Act’s (FLSA) “white collar” exemptions should take note.
The FLSA is the federal law that governs minimum wage and overtime pay for all hours worked. Currently, “white collar” exemptions may apply where workers meet certain duties tests and are paid on a salary basis of at least $455 per week. These workers are considered exempt under the FLSA’s executive, administrative, professional, or outside sales exemptions.
The proposed rule replaces the controversial Obama era rule which attempted to double the minimum salary to qualify for exemption from $23,660 to over $47,000 and was blocked by a permanent injunction in a Texas court.
The DOL’s new rule also increases the salary threshold for highly compensated employees from $100,000 to $147,414. That amount is about $13,000 higher than the Obama administration’s rule.
The DOL declined to make any changes to the duties tests which must be met to be exempt. The DOL has also declined to include an automatic increase of the salary basis. Instead, the rule proposed updating the salary levels every four years after notice-and-comment periods.
Employers have 60 days to submit comments on the proposed rule to the DOL. After consideration of the comments submitted, a final rule will be published. The DOL estimated that the final rule will take effect in January 2020.
If a final rule issues without revision, employers should review exempt employee’s salaries more than $23,660, but less than $35,308 to determine whether it will comply by raising the salary to preserve exempt status or reclassifying the employee as non-exempt.
Stay tuned to LRworkplacedefender for updates regarding the final rule. For more information about how the salary increase may impact your employees, contact the LeClairRyan attorney(s) with whom you regularly work.