10 May FLSA Update: DOL Proposes Salary Increase for White-Collar Overtime Exemptions
It’s not déjà vu. The Department of Labor is trying to change the white-collar overtime exemptions …again. On March 22, 2019, the DOL published a proposed rule that would increase the minimum salary requirements for the Fair Labor Standards Act’s executive, administrative and professional overtime exemptions.
The DOL estimates that 1.3 million currently exempt employees would become nonexempt under the proposed rule. Without some form of intervention, employers will have to start paying overtime to these newly-nonexempt employees.
The proposed rule does not change the standard duties tests for exempt white-collar employees. Instead, the DOL focused primarily on updating the minimum salary and compensation levels needed to qualify for the executive, administrative and professional overtime exemptions.
Proposed Salary Level [Current Salary Level]
Weekly: $679 [$455]
Bi-weekly: $1,358 [$910]
Semi-Monthly: $1,471 [$985.83]
Monthly: $2,942 [$1,971.66]
Annually: $35,308 [$23,660]
The proposed rule also increases the total annual compensation needed to exempt “highly compensated employees” from $100,000 to $147,414 per year. It also allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level, but payments must be made on an annual or more frequent basis.
According to the DOL, salary levels needed to be updated to reflect growth in wages and salaries. The proposed salary levels, however, are lower than the salary levels required under the 2016 final rule, which was blocked by a federal court. The minimum salary needed to qualify for white-collar exemptions under the 2016 final rule was $913 per week ($47,476 per year).
The period for public comment on the proposed rule opened March 22nd and closes May 21, 2019. The DOL anticipates that the proposed rule, once finalized, will become effective in 2020. This gives employers some time to prepare, but not a lot.
Employers are once again facing uncertainty and confusion surrounding the white-collar overtime exemptions. The result is an increased risk exposure. Employment Practices Liability Insurance can protect against various employment-related claims. Limited coverage for wage and hour claims may be available.
Please contact us if you would like to learn more about employment practices liability insurance.