March 19, 2019
The Department of Labor (DOL) recently issued a proposed rule that would change the salary thresholds for the "white collar" overtime exemptions under the Fair Labor Standards Act (FLSA). The FLSA requires virtually all employers in the United States to pay overtime wages to employees who work more than 40 hours in a workweek. However, exemptions exist for executive, administrative, and professional employees (EAPs) and highly compensated employees (HCEs).
Under the proposed rule, the minimum salary level for EAPs would increase from $455 to $679 per week ($35,308 per year). This is significantly lower than the $913 salary level set in the 2016 final rule (which never took effect due to an injunction).
This proposed rule would also allow employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level. The minimum salary level for highly compensated employees (HCEs) would also increase from $100,000 to $147,414 per year (an increase from the 2016 final rule's annual threshold of $134,004).
DOL regulations have generally required each of three tests to be met for one of the FSLA overtime exemptions to apply:
In the 2019 proposed rule, the DOL is proposing to update both the minimum weekly standard salary level and the total annual compensation requirement for HCEs to reflect growth in wages and salaries. The DOL is also proposing revisions to the special salary levels for employees in the motion picture industry and certain U.S. territories. The DOL is not proposing any change to the "duties test," despite speculation that it would do so.
The following are key provisions of the proposed rule:
These changes will not take effect until after a final rule is issued. Employers are not required to comply with the proposed rule at this time, but should become familiar with it and begin identifying which employees may be affected.
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