On March 7, 2019, the Department of Labor (“DOL”) announced a second attempt to increase the minimum salary that employers must pay an employee for that employee to be exempt from overtime under the Fair Labor Standards Act. Since 2004, the minimum salary has been $455 per week or $23,660 annually. You may recall that in 2016, the DOL issued a final rule that increased the salary threshold to $913 weekly or $47,476 yearly. The 2016 rule also provided for automatic increases in the threshold without having to go through the normal rulemaking process. Lawsuits and a new President kept the 2016 changes from going into effect.
This time, the DOL proposes a more modest increase in the minimum salary level to $679 per week or $35,308 annually. This proposed rule does not include automatic adjustments, though the DOL says it will periodically review the salary threshold and consider proposed increases through the normal notice and comment rule-making process.
Of course, to be exempt, employees must perform certain duties. Like the 2016 rule, this proposal would not change the duties requirements. The DOL estimates that the new rule would make a million more Americans eligible for overtime.
Currently, there is a provision in the law known as the “highly compensated employee” exemption whereby an employee who makes $100,000 or more a year is exempt regardless of the duties performed. The new rule proposes an increase in that threshold to $147,414. This is a larger proposed increase than the 2016 rule, which only sought to bump the highly compensated employee number to $134,004.
The public now has 60 days to comment on the proposed rule. It is not known at this time when the proposed rule would go into effect. We anticipate this new rule will become final in substantially the same form as proposed. Therefore, all employers should determine now whether they have employees who would be affected by the new salary levels and begin to make preparations to comply. We will continue to monitor this development and remain available if you have questions.