By Brian R. Carnie

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.

By Chelsea Gomez Caswell

Yesterday, the Department of Labor (“DOL”) Wage and Hour Division released a preview copy of a request for information (“RFI”) before issuing revised proposed overtime exemption regulations under the Fair Labor Standards Act (“FLSA”). The RFI is scheduled for publication in the Federal Register today, July 26, 2017, which will start a 60-day public comment period.

According to the DOL’s news release, the RFI solicits feedback on questions related to the salary level test, the duties test, various cost-of-living information, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary test for highly compensated employees, and automatic updating of the salary level test. Instructions for submitting comments and additional contact information are found in the RFI. A preview copy of the RFI, released by the DOL, is available online here.

The regulations at issue (often referred to as the “white collar” exemptions) apply to workers employed in an executive, administrative, or professional capacity that also meet certain criteria relating to salary basis, salary level, and job duties. The DOL released the RFI in contemplation of revising the final rule released by the DOL during the Obama administration  (“2016 Final Rule”), which attempted to raise the minimum salary required to be exempt from the FLSA’s overtime pay requirements, from $455 per week to $913 per week. The 2016 Federal Rule was enjoined by a federal district judge in Texas in November 2016  and remains in limbo. In fact, in briefing to the Fifth Circuit Court of Appeal recently filed last month, the DOL acknowledged that it intends to undertake steps and further rulemaking to determine what the salary level should be. It is now clear that these steps include the release of the RFI. The RFI states that in light of the pending litigation, the DOL decided to issue the RFI, rather than immediately proceed to a notice of proposed rulemaking (“NRPM”), in order to gather public input and aid in the development of a NRPM. The DOL expressly recognized that it released the RFI to address stakeholder concerns, including concerns that the standard salary level set in the 2016 Final Rule was too high and to address the Rule’s potential adverse impact on low-wage regions and industries.

Some of the specific questions posed in the RFI include but are not limited to the following:

  • Whether updating the prior 2004 salary level for inflation would be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used;
  • Whether the regulations should contain multiple standard salary levels and, if so, how they should be set;
  • Whether different standard salary levels should be set for the executive, administrative, and professional exemptions;
  • Whether the standard salary level set in the 2016 Final Rule works effectively with the standard duties test;
  • To what extent employers increased salaries of exempt employee to retain exempt status, or otherwise altered employees’ hours or pay, in anticipation of the 2016 Final Rule’s effective date;
  • Whether small businesses or entities encountered any unique challenges in preparing for the 2016 Final Rule’s effective date;
  • Whether a test for exemption relying solely on duties performed, without regard to the amount of salary paid, would be preferable;
  • Whether the salary level set in the 2016 Final Rule excluded from exemption particular occupations traditionally covered by the exemption; (
  • Whether there should be multiple total compensation levels for the highly compensated employee exemption; and
  • Whether the standard salary level and highly compensated employee total annual compensation level should be automatically updated on a periodic basis.

Although the future of the FLSA overtime regulations is still uncertain, for employers the key takeaway is that, for the time being, nothing has changed. The RFI suggests that changes are on the horizon, but for now, the 2016 Final Rule is still enjoined, and the DOL will not issue any revised rules until after the 60-day public comment period lapses and an NRPM is issued. Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week), but it is important for employers to continually monitor this ever-changing issue.

For additional information, see the DOL’s July 25, 2017 news release, available here.