After much anticipation, the U.S. Department of Labor (DOL) has finally proposed new regulations to increase the salary threshold for the Fair Labor Standards Act (FLSA) “white collar” exemptions. The notice of proposed rulemaking would raise the salary threshold to $679 per week ($35,308 per year).
Since 2004, the FLSA salary threshold for white collar exemptions has been $455 per week ($23,660 per year). For years, many have complained that this amount is too low, resulting in too many employees being classified as exempt under the FLSA and thus not entitled to overtime pay. Under the FLSA, an employee is entitled to overtime pay unless an exemption applies. The most commonly used exemptions are the white collar exemptions—executive, administrative, professional, and a few others—which require that the employee perform certain duties and be paid a salary that equals or exceeds the salary threshold. In 2016, DOL, under the Obama administration, moved to raise the salary threshold to $913 per week, and to make future increases to the threshold automatic. That 2016 rule, however, was enjoined by a federal court hours before it was to go into effect. DOL has now revoked the 2016 rule.
In addition to increasing the salary threshold to $679 per week, DOL’s new rule will allow certain nondiscretionary bonuses and incentive payments to count towards up to 10 percent of the standard salary level. Currently, the salary threshold must be satisfied by salary alone. The new rule also increases the threshold compensation for the “highly compensated” exemption from $100,000 to $147,414. Rather than automatic increases to these earnings thresholds, the new rule simply states that DOL intends to update the earnings thresholds every four years.
DOL’s proposed salary threshold is only a proposal for now. There will be a 60-day comment period, after which DOL may make further adjustments to its proposal. Most likely, the new rule will go into effect in a few months. DOL forecasts that the new rule will make a million more Americans eligible for overtime than are currently.
Employers should act now to determine which employees will become non-exempt under the new rule. The employment law attorneys at Vandeventer Black LLP are available to assist employers in deciding how to address this change.