The Trump Administration has released the new proposed rule changes to the salary requirements to be exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).
Under the new proposed rule, the U.S. Department of Labor wants to increase the minimum salary threshold that must be paid in order for most executive, administrative or professional employees to qualify for exemption from $455 per week ($23,660 annually) to approximately $679 per week ($35,308 annually). This salary level is expected to change before the rule becomes final (which most likely will happen sometime in 2020), and the final threshold will be based on the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (the South) and in the retail sector once data for 2018 is released and adjusted for inflation. The new salary threshold would not apply to teachers, doctors, lawyers, or certain other exempt professionals who are not currently subject to the salary basis or salary level tests. While the proposed new salary threshold is more than $12,000 less per year than what was sought by the Obama Administration in 2016, it still represents a 50% increase from the current minimum salary threshold and will present headaches for many employers who have exempt employees who are paid well below this new salary level. Contrary to what many expected, the proposed rule also does not seek to phase in the increase over time.
The proposed rule also raises the minimum required salary paid to an employee to qualify for the highly-compensated employee exemption, which under the proposal would go from $100,000/year to $147,414/year. This is significantly higher than the increase sought by the Obama DOL in 2016 (which was $134,000/year).
The proposed rule does not establish mechanisms for automatic increases to the salary requirements on a yearly basis, but the DOL said it will review the minimum salary threshold every four years and will seek public comment before changes are made. The proposed rule makes no changes to the duties requirements that these administrative, executive or professional employees must meet in order to qualify for exemption.
The DOL will accept public comment on the proposed rule for a period of 60 days, and a final rule can be expected over the next 12 months. Of course, this rule is likely to be subject to court challenge.
Stay tuned for further updates.