On August 30, the U.S. Department of Labor (DOL) released its long-awaited proposed rule on raising the salary level for white-collar exemptions under the federal Fair Labor Standards Act (FLSA) with the intent of expanding overtime payments for over 3 million U.S. workers. The proposed rule increases the weekly salary levels as follows:
- Executive, Administrative and Professional (EAP) Exemptions
The DOL proposes to set the EAP salary level at $1,059 per week ($55,068 per year); the current salary level is set at $684 per week ($35,568 per year).
- Highly Compensated Employees (HCE) Exemption
The DOL proposes to set the required annual salary for the HCE exemption at $143,988; the current salary level for HCEs is set at $107,432 per year.
- Computer Professionals Exemption
A computer professional may be paid based on the weekly salary level for EAP exemptions or an hourly rate of at least $27.63 per hour. The proposed rule does not change the current hourly rate; however, those workers paid on a salary basis would be subject to the proposed increase for the EAP exemptions.
- Additional Proposals
The proposed rule also seeks to apply overtime protections for workers in U.S. territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands), who are covered by the FLSA to ensure that they also have the same overtime protections as other U.S. workers.
Lastly, the proposed rule also contains a provision to automatically update the salary level every three years.
As a reminder, for an employee to qualify as exempt from the FLSA’s minimum wage and overtime requirements, an employee must meet the duties test of an exemption, be paid a minimum salary level, and not have that salary subject to improper deductions based on the quantity or quality of the work. Additional information on exemptions and these requirements is available on the DOL’s website.
Next Steps
The proposed rule is currently available to the public on the DOL’s website and will be followed by the publication of the Notice of Proposed Rulemaking (NPRM) in the Federal Register. After publication in the Federal Register, the proposed rule will go through a public comment period (generally, 60 days) prior to finalization. For reference, the DOL website contains additional information on the proposed rule, including frequently asked questions.
As with prior proposals to increase the salary level, this proposed rule may be subject to challenges which could delay the rulemaking process or result in changes to the proposed salary level prior to it being effective. As a result, employers need to not make any major decisions or changes just yet but should be evaluating how this may impact any workers who currently do not meet the proposed salary level and what your plan regarding these workers will be (i.e., increasing salaries or changing employees to a non-exempt status).
Employers should also remain cognizant of any applicable requirements for exemptions at the state level, as some states have salary levels and duties tests that currently have higher thresholds/requirements that those under the current federal law and the proposed rule. Where federal and state law differ, employers are required to follow the law that provides the greatest protections for the employee.
HR Works will continue to monitor this topic and provide updates as information becomes available.
