The Department of Labor (“DOL”) has issued its much-anticipated proposed rule on the minimum salary level for an employee to potentially qualify as exempt from overtime eligibility under the Fair Labor Standards Act (“FLSA”). Since a federal district court enjoined the Obama administration’s own proposal in late 2016, industry watchers had been anxiously waiting to hear where the Trump administration would seek to set the pay threshold. On March 7, 2019, they received their answer, with Labor Secretary Alex Acosta announcing that the DOL intended to raise the salary level for a “white-collar” employee to be deemed exempt from the FLSA’s overtime requirements to $679 per week (equivalent to $35,308 annually). According to the DOL, if this rule becomes final, over 1 million additional workers will be entitled to receive overtime.
Under the currently enforced rule, salaried employees paid below $455 per week (equivalent to $23,660 annually) must be paid overtime if they work more than 40 hours. Those making at least this amount are exempt from overtime requirements if they are primarily engaged in so-called “white-collar” work – i.e., performing executive, administrative, or professional duties. Some computer-related and outside sales positions are subject to the same rule. The Obama administration sought to double the threshold salary to $913 per week (equivalent to $47,476 annually), reportedly extending overtime eligibility to over 4 million workers. Secretary Acosta had indicated that he intended to address the salary level, which has not been updated since 2004, but viewed the prior revisions as far too drastic.
In addition to setting the new floor at $679 per week, the proposed rule abandons the Obama administration’s mechanism for automatically raising the salary level every 3 years. Instead, the DOL is asking for public comment on how it might approach updating the threshold every 4 years. Further coverage regarding the prior administration’s proposal, final rule, and related litigation can be found in our previous blogs.
The proposed rule also seeks to make other key overtime eligibility changes. As to the minimum exemption threshold, up to 10% of the salary level could be met by crediting nondiscretionary bonuses and incentive payments, such as commissions. On the other end of the earnings spectrum, the proposal would increase the total compensation needed to reach the so-called “highly-compensated employee” overtime exemption from $100,000 to $147,414 per year. Such employees are exempt if they primarily engage in office or non-manual work and regularly perform at least 1 of the duties of a “white-collar” worker.
Once the proposed rule appears in the Federal Register, the public will have 60 days to submit comments.
With the seemingly ever-changing requirements surrounding employee pay on both the federal and state level, it’s important for employers and employees to understand their rights and responsibilities. If you have any questions about how this proposed rule might impact you or your business, please feel free to contact Conn Kavanaugh’s experienced employment lawyers.