Department of Labor Issues Notice of Proposed Rulemaking to Update Overtime Regulations
On March 7, 2019, the U.S. Department of Labor (DOL) announced a proposed rule to update and revise Fair Labor Standards Act (FLSA) white collar exemptions by raising the salary level for an exemption from $455 per week ($23,660 annually) to $679 per week ($35,308 annually).
By raising the salary level threshold from the current 2004 level, FLSA overtime protections, if enacted, will cover more workers. To be exempt from FLSA overtime pay requirements, employees must generally be paid on a salary basis at or above a specified minimum weekly salary level and meet certain requirements related to their primary job duties.
This proposed rule has been in the works for a few years. On May 23, 2016, the DOL issued a final rule increasing the standard salary level; however, it was declared invalid by the U.S. District Court for the Eastern District of Texas and an appeal was filed.
In this rulemaking, the DOL proposes to formally rescind the 2016 rule and propose a new rule that both:
- Updates the minimum weekly standard salary level to reflect growth in wages and salaries; and
- Allows the inclusion of certain nondiscretionary bonuses and incentive payments to count towards up to 10 percent of the standard salary level.
The DOL also proposes:
- To update the total annual compensation requirement for the “highly compensated employee” test.
- To revise the special salary levels for employees in the motion picture industry and certain U.S. territories.
- An intention to propose updates to the earnings thresholds every four years (but it does not propose automatic adjustments as previously expected).
There is no specific action employers are required to take at this time because the rule is proposed and not enacted.
The DOL encourages the public to submit comments about the proposed rule electronically. Once the rule is published in the Federal Register, the comment period will run for 60 days. The DOL anticipates the rule will take effect January 1, 2020.
In the meantime, a modification of the 2004 threshold is inevitable; therefore, employers should begin to review and analyze the reclassification of employees. This analysis should incorporate not only the FLSA but also any applicable state and/or locality minimum wage rate because the higher rate controls and requires compliance.
We’ll Explain Later
Join wage and hour experts Ellen Kearns, J.D. and Renee Farrell, SPHR, SHRM-SCP, as they explain what you need to know about the overtime rule and several other hot wage and hour topics you need to be compliant with in our April 16 SHRM- and HRCI-certified webinar. Can’t make that date? Register anyhow and we will send you a recording.
Subscribe to our blog so we can keep you up-to-date on the latest developments in this ongoing saga, and, if you really want to get into the weeds, read some of the dozen or so posts we have already published on this topic.