On Mar. 7, 2019, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) regarding changes to the “white collar” overtime exemptions under the Fair Labor Standards Act (FLSA).
Here are three key points employers need to know:
1. The salary basis threshold would increase to $679 per week ($35,308 per year).
The DOL set this threshold by using the same methodology from the 2004 revisions, which set the salary level at $455 per week.
In 2004, $455 per week represented the 20th percentile of earnings for full-time salaried workers in the lowest-wage census region and in the retail sector. The new annual salary of $35,308 represents the DOL’s estimate for the 20th percentile standard in January 2020, when it anticipates the rule to become final. The NPRM would also permit employers to count nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more-frequent basis to satisfy up to 10 percent of the standard salary level.
With the prior rule issued under President Barack Obama, the DOL attempted to change the salary basis level from $455 to $913 per week. As we have covered in this blog, the change did not take effect because the United States District Court for the Eastern District of Texas blocked the rule from taking effect. Under President Donald Trump, the DOL ultimately stopped pursuing the rule and dropped its appeal of the Texas court’s ruling.
2. The salary basis threshold for highly compensated employees would also increase from $100,000 to $147,414 per year.
The proposed salary basis threshold represents the 90th percentile of full-time salaried workers nationally, as projected by the DOL for 2020. This was the same methodology used by the DOL for the Obama-era rule.
3. The duties tests for executive, administrative and professional employees remain unchanged.
Assuming an employer has properly classified its exempt employees, the NPRM will not change that classification, unless the employee no longer satisfies the salary basis threshold.
Given how the Obama-era rule met its demise, the NPRM is unlikely to be the final word. Stay tuned for additional developments.