The U.S. Department of Labor (DOL) has proposed increasing the minimum salary level needed to qualify for the "white collar" overtime exemptions under the Fair Labor Standards Act. The proposed rule is subject to public comment for 60 days.
In general, the proposal would raise the required weekly salary level for white collar overtime exemptions from the current $684/week ($35,568/yr.) to $1,059/week ($55,068/yr.) and would raise the level for highly compensated employees from $107,432/yr. to $143,988/yr.
To be exempt from overtime, the salary level would have to be met, in addition to the actual job duties under the DOL's duties tests. There are no proposed changes to the duties tests.
The proposed threshold will "update" every three years based on Bureau of Labor Statistics data. The new levels would be published 150 days before the effective date. The DOL could delay an update based on unforeseen economic or other conditions.
On April 23, 2004, the required weekly salary level was established at $455 ($23,660/yr.). On May 23, 2016, the Department increased that weekly level to $913 per week ($47,476/yr.). The rule was challenged in federal court in Texas. On November 22, 2016, a Texas federal judge enjoined the DOL from enforcing the rule. On August 31, 2017, the court granted summary judgment against the DOL, invalidating the rule. That ruling was appealed by the government to the U.S. Court of Appeals for the Fifth Circuit, where it was held in abeyance.
In March of 2019, a proposal was made to increase the weekly rate from $455 to $684, and to increase the highly compensated employees up to $107,432. These levels became effective on January 1, 2020.
Meanwhile, what will employers do, if the proposed regulation is approved?
· Pay more overtime
· Require workers to work less or some combination of the above
· Cut pay to compensate for the overtime
· Hire more part-time employees to perform overtime work
· Make operating cuts to pay for the increased expense
Employers should take time to review the current categorization of employees as exempt or nonexempt from overtime, as well as:
· How many employees are affected
· The financial impact of not requiring overtime, paying overtime, or raising employees above the threshold
· How will you discuss changes with affected employees and how they will track their time, and
· How employees will need to get approval for overtime before they are allowed to work overtime. This should be in a written policy.