DOL Reveals New Proposed Overtime Salary Requirement

The wait is over. Yesterday, the U.S. Department of Labor (“DOL”) released its proposed rule that would amend the regulations governing the exempt status of executive, administrative and professional employees under the Fair Labor Standards Act (“FLSA”), also known as the “white collar” exemptions.

Employers have been anxiously awaiting this proposed rule ever since the DOL’s 2016 final rule was invalidated by a federal court in Texas. As was widely expected, the proposed rule released yesterday is less sweeping than the proposed 2016 final rule but is still anticipated to impact thousands of businesses and their workers. If this proposal is adopted, the DOL estimates that over 1.1 million new workers could become eligible for overtime pay.

Under the proposed rule:

1. The minimum salary threshold for the white collar exemptions would increase from $455 per week ($23,660 per year) to $679 per week ($35,308 per year). This is an increase from the current threshold but less than the increase to $913 per week ($47,476 per year) proposed by the 2016 final rule.
2. Employers would be permitted to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new minimum salary threshold.
3. The total minimum annual compensation requirement for the highly compensated employee exemption would increase from $100,000 to $147,414.
4. The DOL also has proposed adjusting the salary threshold every four years through notice-and-comment rulemaking, rather than the automatic annual increases as proposed by the 2016 final rule.

The proposed rule does not include any changes to the “duties test,” which is the other aspect of determining employees’ exempt status.

Over the next 60 days, the DOL is seeking public comments on the proposed rule. These comments will be reviewed and used to help the DOL publish the final rule.

We will keep you updated as the proposed rule advances. In the meantime, employers should review their current employee salaries and classifications to understand the impact this proposed rule may have on their business.

*Mahja Zeon is included as an author on this alert. She is admitted in Indiana only, with her admission to the Michigan bar pending.