On March 7, 2019, the U.S. Department of Labor (“DOL”) announced the new proposed rule modifying the Fair Labor Standards Act’s overtime regulations. This proposed rule (“New Rule”) replaces the rule issued by the Obama Administration in 2016. At that time, the Obama Administration sought to increase the salary threshold for the “white collar” (administrative, professional and executive) exemptions from $23,660 annually ($455 weekly) to $47,476 annually ($913 weekly). The 2016 rule also proposed increasing the salary threshold for the highly compensated employee exemption from $100,000 annually to $134,000 annually. The 2016 final rule was enjoined by a U.S. District Court in Texas shortly before it was schedule to take effect. Thus, the prior salary thresholds have remained in effect and still control.
Since taking office in January 2017, it has been anticipated that the Trump Administration would propose a smaller increase to the salary threshold requirements. The long-anticipated New Rule proposes increasing the salary threshold for the “white collar” exemptions to $35,308 annually or $679 per week. This is over $12,000 less than the 2016 proposal. However, the New Rule also seeks to raise the salary threshold for the highly compensated employee exemption to $147,414 annually, which is over $13,000 higher than the 2016 proposal. Additionally, the New Rule, if implemented, would:
- Include periodic reviews of the salary threshold, with notice and comment periods required before new changes could be implemented;
- Allow employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the salary threshold;
- Not change overtime protections for certain groups of employees, such as police officers and fire fighters; and
- Not make any changes to the duties test.
The DOL is encouraging interested persons to comment on the New Rule at www.regulations.gov. At this time, there is no expected effective date of the New Rule. Once the New Rule is published, the public will have 60 days to issue comments for consideration.
What does this mean for employers?
- If the New Rule is implemented, then, according to the DOL, approximately one million employees will be newly eligible for overtime compensation.
- To plan ahead, employers can begin evaluating its employees making more than $23,660 but less than $35,308 annually to determine how to treat such employees if the New Rule were to take effect.
- This provides another opportunity for employers to evaluate their current employee exemption statuses to ensure compliance with federal and state wage and hour laws.
For more information or questions on the DOL’s New Overtime Rule, please contact Kathryn K. Rudderman.