On March 7, 2019, the United States Department of Labor (DOL) announced a proposed rule that would increase the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). Under the currently-enforced law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. Workers making at least this salary level may be exempt from overtime based on their job duties. This salary level was set back in 2004.
Under the current proposal, the exemption requirements would be subject to the following changes:
The minimum salary required for an employee to qualify as exempt from overtime would increase from the currently-enforced level of $455 to $679 per week ($35,308 annually). According to the DOL, this increase would make more than a million more American workers eligible for overtime pay.
The total annual compensation requirement for “highly compensated employees” (HCE) from the currently-enforced level of $100,000 to $147,414 per year.
A commitment to periodic review to update the salary threshold. An update would continue to require notice-and-comment rulemaking.
Employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.
The proposal maintains the currently-enforced job duties test. Therefore, in addition to meeting the salary threshold, an employee’s job duties also must primarily involve executive, administrative or professional duties as defined by the regulations to qualify as exempt.
The proposed increase in the salary threshold will impact employers in states that follow the FLSA overtime exemption rules or have a lower salary threshold for overtime exemption than the current proposed increase. Once the rule takes effect, employees in those states who earn less than $679 per week will have to be classified as non-exempt and be paid overtime if they work more than 40 hours per week, notwithstanding their job duties.
To keep wages in check, employers should consider implementing overtime policies that restricts non-exempt employees from working overtime without prior approval from management. Employers may also consider increasing salaries above $35,308 per year to maintain the exempt status of their currently exempt employees.
The public comment period for the U.S. DOL proposal ends May 21, 2019. The new rules are anticipated to go into effect in 2020.
No Change for New York Employers
The change to the FLSA overtime exemption rules will not impact New York employers because the salary threshold for exempt employees are higher under New York State law than the proposed $679 per week.
The following table outlines the currently-enforced threshold under New York State law:
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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2019 Law Offices of Pullano & Farrow PLLC