DOL Issues Proposed Overtime Rule, Increasing Minimum Salary Threshold
March 11, 2019
Types : Alerts
The United States Department of Labor (“DOL”) has released its long-anticipated proposed rule that is intended to increase the number of employees who are eligible for overtime pay under the Fair Labor Standards Act (“FLSA”) – though not as greatly as the rule proposed in 2016. Generally, an employee will only be exempt from the FLSA’s overtime requirement if the employee is paid a salary that is greater than the minimum salary threshold and the employee performs duties that satisfy the tests for the FLSA’s executive, administrative, or professional “white collar” exemptions. The proposed rule raises the minimum salary threshold from $23,660 per year (or $455 per week) to $35,308 per year (or $679 per week).
The proposed rule will also allow employers to count certain nondiscretionary bonuses and incentive payments to satisfy up to ten percent of the worker’s salary level and increase the total annual compensation threshold for highly compensated employees from $100,000 to $147,414. Notably, the proposed rule does not make any changes to the duties tests, which are applied to identify employees who are exempt under the FLSA’s white collar exemptions.
The DOL’s proposed rule does not provide for further, automatic increases to the salary threshold. Although the proposed rule does state an intention to review and update the minimum salary threshold every four years, rather than an automatic update, any additional increase to the salary threshold must first go through the rulemaking process, including notice and comment periods.
The DOL’s proposed rule replaces the Obama administration’s 2016 overtime rule, which was enjoined just before it would have become effective. The proposed rule is now subject to a 60-day comment period. A final regulation is expected to become effective in January 2020.