Less than three years after a Texas judge issued an injunction against the previously proposed FLSA exempt salary level, the Department of Labor (DOL) has brought back a new proposed rule. President Obama previously proposed raising the current salary threshold for exempt employees from $23,660 annually ($455/week) to $47,476 annually ($913/week). Despite full anticipation of the ruling being passed, and many employers preparing accordingly, the proposed rule was never passed in 2016.
A new development occurred on March 7, 2019, when the DOL announced another proposed rule which, if passed, would raise the current minimum salary level from $23,660 ($455/week) to $35,308 ($679/week). Although these are lower thresholds than the 2016 proposal, it’s still estimated that over one million additional U.S. workers would be eligible for overtime if this rule is passed. The rule does allow for up to 10 percent of the salary level to come from non-discretionary bonuses and/or incentive payments (including commissions). The executive threshold has also been proposed to increase from $100,000 to $147,414 annually.
There are no proposed changes to the equally important duties test. Employees in the current rule and in the proposed rule must still pass both the salary and duties test to qualify as salary exempt. Although the DOL proposes that the rule wouldn’t go into effect until January 2020, we encourage employers to review their exemptions on an annual basis. Employers should review their job classifications and determine what changes, if any, may be necessary if the proposed rule becomes final. In case of a DOL audit, formal position descriptions are key in justifying an exempt classification. Wage and hour analyses may also be beneficial to see the potential budgetary impact if you need to convert employees to non-exempt, therefore making them eligible for potential overtime.
We will continue to follow this ruling closely and provide regular updates. In the meantime, the DOL welcomes comments to the proposed rule. The public will have 60 days to comment on the proposed regulations, and the comment period will begin on the date of the publication in the Federal Register. Check this link for updates on when the comment period begins: https://www.dol.gov/whd/overtime2019/