DOL Issues Proposed New Rule Increasing Minimum Salary Threshold for Exemptions Under FLSA

Last week, the United States Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking increasing the minimum salary requirement for positions to qualify as exempt from the Fair Labor Standards Act’s (“FLSA”) overtime requirements. Currently, the minimum salary requirement is set at $455 per week or $23,660 per year for a job position to qualify for any of the “white collar” exemptions.

The DOL’s proposed rule would increase the minimum salary requirement under FLSA for a position to qualify as exempt under the salary test from $23,660 to $35,308 per year. Under the rule, the DOL has also proposed a mechanism for regular increases to the minimum salary requirements every four years, which is likely designed to remedy the fact that the current salary threshold of $23,660 has remained static since 2004.

Not only has the DOL proposed an increase in the minimum weekly salary for the “white collar exemptions,” but it has also proposed an increase in the minimum salary for the highly compensated employee exemption from $100,000 to approximately $147,414. Consistent with the DOL’s proposal for regular increases to the minimum salary threshold for the “white collar” exemptions, it has created an index for future wage increases for highly compensated employees.

Furthermore, if the new rule goes into effect, it will allow employers to take into account non-discriminatory bonuses and incentive payments in satisfying the minimum salary requirements to qualify for an exemption. While the DOL has proposed changes to the salary levels for positions to qualify for exemptions, it has not made any changes to the “duties test.” Thus, employers must still evaluate whether a position is properly classified as an exempt position based upon both the salary test and duty test.

This is the second attempt by the DOL to increase the salary thresholds for exempt positions under the FLSA. The first attempt, under the Obama Administration, was blocked by a federal judge in Texas shortly before the rule was to take effect in December 2016. Although the new rule increases the threshold for the “white collar” exemption by $11,648, it is still approximately $12,000 less than the threshold set by the DOL under the Obama Administration rule. In contrast, the salary for highly compensated workers would increase to $147,414 under the new proposed rule which is $13,000 higher than the Obama Administration rule.

Once the new rule is published in the Federal Register, the public will have 60 days to provide the DOL with comments. If this new rule goes into effect, it will have a significant impact upon employers, who will be required to undertake, once again, an analysis of positions currently classified as exempt from overtime under the present salary levels to determine whether to increase the salary level to the new threshold or reclassify the position as a non-exempt, overtime eligible position.

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