U.S. Department of Labor Releases Updated Overtime Exemption Proposal

Mar 8, 2019

On March 7, 2019, the U.S. Department of Labor (“DOL”) announced an important proposed rule change to the overtime exemption for “white collar” workers under the Fair Labor Standards Act (“FLSA”). The rule is expected to impact the overtime eligibility of over one million workers who are currently classified as “exempt” (non-overtime eligible) under the executive, administrative and professional exemptions, creating a smaller disruption than the 2016 rule that never took effect.

The DOL utilized 2020 salary projections to propose an increase in the minimum salary threshold-commonly known as the “salary basis test” for the white collar exemptions under the FLSA- from $455 per week ($23,660 annually) to $679 per week ($35,308 annually).

Additionally, unlike the 2016 rule that contained an automatic rate increase every three years, the proposed rule would create periodic reviews of the salary threshold every four years and require fresh notice-and-comment rulemaking for any new proposed increase in the threshold.

Other highlights of the new rule include: 

  • Employers will be allowed to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level; certain “catch up” payments would be permissible as well.
  • The total annual compensation threshold for highly compensated employees subject to a “minimum duties test” would increase from $100,000 to $147,414-the 90th percentile of all salaried workers projected forward to 2020.
  • The current “duties tests” for the executive, administrative and professional exemptions would remain unchanged.
    The public has 60 days to comment on the proposed regulation from the date the rule is published.

Although not as expansive as the 2016 rule change that would have increased the minimum salary for exempt workers to over $47,000, this rule will still impact many businesses and non-profits whose salaried workers are currently paid less than $35,000 per year. Employers should carefully evaluate their current pay practices to ensure that they are prepared for the expected changes ahead.

The attorneys in the Labor and Employment Group of Bose McKinney & Evans are available to answer your questions and provide guidance regarding the impacts of these changes.