On March 7, 2019, the Department of Labor (“DOL”) announced the long-awaited proposed rule containing the new salary threshold for employees to be exempt under the Fair Labor Standards Act. The new proposal would update the salary threshold from the current $455 per week (or $23,660 annually) to $679 per week (or $35,308 annually).
The proposed rule would make it such that employees making under $35,308 would be entitled to overtime pay (time and a half) if they work more than 40 hours per week. The job duties tests for the white collar exemptions would not change under the proposed rule.
Although this is a substantial jump from the current salary threshold, it is significantly lower than the Obama administration’s proposal of $913 per week (or $47,476 annually). While the Obama administration’s proposal would have impacted an estimated 4.2 million employees, it was blocked by a federal court in 2016. It is estimated that the new salary threshold would impact over 1 million employees. Of course, this will affect any employer who currently classifies an employee as exempt, but compensates the employee below the new threshold.
Along with the new proposed rule, the DOL is asking for public comment on whether the salary threshold should be updated—in the DOL’s discretion—every four years. Any such periodic update would require notice to the public and a time for public comment. Another change would be the salary level for the Highly Compensated Employee (“HCE”) exemption. The new rule would significantly increase the salary level for HCEs from the current $100,000 to $147,414.
The proposed rule is expected to be published in the Federal Register in the coming weeks. At that point, there will be a 60-day public comment period. Although many experts expect that the new rule will be the subject of multiple lawsuits, the DOL expects the final rule to go into effect in January 2020.