DOL Issues Its New Proposed Rule for Salary Threshold for Exempt Employees

On March 7, 2019, the U.S. Department of Labor issued its long-awaited replacement of the Obama administration’s controversial overtime rule, raising the minimum salary threshold required for workers to qualify for the Fair Labor Standards Act’s “white collar” exemptions to $35,308 per year ($679 per week), from the previous $23,660 per year ($455 per week), which had been in effect since 2004. The new Proposed Rule would update the FLSA’s overtime exemptions for executive, administrative and professional and replace a currently enjoined rule that was finalized in 2016. The “duties” test for exempt employees was not changed with the new Proposed Rule. Under the new Proposed Rule, employers will be able to count certain non-discretionary bonuses and incentive payments, like commissions that workers receive, for credit of up to 10 percent toward a worker’s salary level. Though the new Proposed Rule raised the floor for white collar exemptions by $11,340, it is still $12,000 lower than the proposed Obama-era Rule, which had raised the minimum salary for such workers to over $47,000. The Obama-era rule was blocked by a Texas federal judge just a few days before it was set to take effect. The Obama-era Rule had also created an index for automatic future increases. In contrast, although the new Proposed Rule also allows for potential increases to the new threshold every four years, it will not be automatic. Instead, any future increases will only take place, if at all, after notice and public comment. Also significant is that for “highly-compensated employees,” the new Proposed Rule substantially raises the salary threshold, from $100,000 to $147,414. That amount is about $13,000 higher than the Obama-era Rule, which had proposed an increase to $134,000. The new Proposed Rule could potentially affect numerous businesses, as the DOL is estimating that the new Proposed Rule will now make more than one million more workers overtime-eligible, unless their salary level is raised to meet the new threshold. This is significantly less than the Obama-era Rule, which was expected to affect about four million workers.

The new Proposed Rule is estimated to take effect in January, 2020. Stay tuned for updates.

If you need help identifying or classifying “exempt” employees in accordance with the new Proposed Rule, or any other issue affecting your business, our team of professionals is ready to assist. Feel free to call us at any time.