What the Proposed Changes to White Collar Exception Salary Thresholds Could Mean for Employers

The U.S. Department of Labor (DOL) has recently announced a notice of proposed rulemaking that would guarantee overtime pay for millions of full-time salaried workers earning less than $1,059 per week or about $55,000 per year.

The rulemaking proposes to update and revise regulations for determining whether certain white-collar salaried employees are exempt from minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA). Employees are exempt if they are employed in a bona fide executive, administrative, or professional (EAP) capacity.

An employee covered by the FLSA must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rate of pay.

What current factors determine if an employee falls within the EAP exemption?

To fall within the exemption, an employee must be paid a salary, meaning they are paid a predetermined and fixed amount that is not subject to a reduction because of variations in the quality or quantity of work performed.

In addition, the employee must be paid at least a specified weekly salary level, which is $684 per week (or $35,568 annually for a full-year employee) in the current regulations. The employee must perform executive, administrative, or professional duties. However, certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers).

What are the changes that the DOL is proposing?

With this rulemaking, the DOL proposes to increase the standard salary level to the 35th percentile of earnings of full-time salaried workers in the lowest-wage Census Region of the United States, which would be $1,059 per week ($55,068 annually) based on current data.

What does this mean for employers?

If the DOL finalizes the draft, employees who earn below the newly increased weekly salary level would no longer qualify for exemptions. Employers should consider how this proposed rule could affect their workforce and may consider:

  • Reducing or eliminating overtime hours by hiring additional workers (or through other means);
  • Increasing the salary of employees who fall below the new threshold;
  • Reclassifying currently exempt employees so that they are eligible for overtime pay; or
  • Reducing the hourly rate of newly classified non-exempt workers to account for additional overtime pay.

Employers with questions regarding the proposed rule or those who wish to voice their concerns should visit the DOL website by clicking here.

Help is available

The business attorneys at O’Reilly Rancilio are available to answer questions regarding federal, state, and local regulations pertaining to business owners. To learn more, please call 586-726-1000 or visit our website.

Categories: Business