Today the Department of Labor (DOL) announced a long-awaited proposed rule to extend overtime protections to employees. The primary purpose of the new rule is to update the salary and compensation levels needed for white collar workers to be exempt. Currently the salary threshold is $455 a week, which is the equivalent of $23,660 a year. As proposed, the rule would raise the salary threshold in 2016 to about $970 a week, which is the equivalent of $50,440 a year. Obviously, if and when the rule goes into effect, all employees who presently are exempt would lose that exemption and would be entitled to overtime pay if their salary does not meet the new minimum amount.
The rule also proposes to raise the salary requirement needed to exempt highly compensated employees from $100,000 to $122,148 in total annual compensation.
The DOL is additionally proposing to automatically update the standard salary and compensation levels annually to “ensure that they maintain their effectiveness going forward, either by maintaining the levels at a fixed percentile of earnings or by updating the amounts based on changes in the CPI-U [consumer price index].” The current proposal raises the standard salary level to the 40th percentile of weekly earnings for full-time salaried workers and raises the highly compensated employees salary level to the 90th percentile.
In the proposed rule, the DOL also discusses the current duties test for exempt employees. In order for an employee to qualify as exempt, the employee must (1) be paid on a salary basis; (2) be paid at least a fixed minimum salary per week as provided in the regulations; and, (3) meet certain requirements as to their job duties. The DOL is not proposing specific regulatory changes at this time, but rather is seeking additional information on the duties tests for consideration in the Final Rule, including responses to the following questions:
- What, if any, changes should be made to the duties tests?
- Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?
- Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?
- Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the Department reconsider its decision to eliminate the long/short duties tests structure?
- Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work?
Additionally, although none are specifically proposed at this time, the DOL is also considering whether to add to the regulations examples of additional occupations to provide guidance in administering the executive, administrative, and professional exemptions, along with additional examples of the application of these exemptions to occupational categories in computer-related fields. The comment period for the proposed rule will be open for 60 days. We will keep readers advised as more information becomes available.