The U.S. Department of Labor (Department) announced a Notice of Proposed Rulemaking (NPRM) that, if passed, would make more than a million more American workers eligible for overtime. The NPRM would increase the minimum salary threshold to qualify for the Executive, Administrative and Professional Exemptions, often referred to as the “white collar exemptions”.
Under the current 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. This salary level was set in 2004.
This new proposal would update the salary threshold using current wage data, projected to January 1, 2020. The result would boost the standard salary level from $455 to $679 per week (equivalent to $35,308 per year). The NPRM does not call for automatic adjustments to the salary threshold.
Importantly, the NPRM is not yet law. Once the rule is published in the Federal Register the public will be able to submit comments for 60 days. But, given that this increase is approximately $12,000 less than the Obama DOL’s proposed increase enjoined by the U.S. District Court for the Eastern District of Texas in November 2016, it likely has a very strong chance of becoming law.
Employers should prepare accordingly by auditing exempt positions to ensure that the “duties test” is met. Remember, if the duties test is not met it does not matter what amount of salary is paid. Employers should also assess whether an increase to the employee’s salary in order to maintain the exemption is feasible, or if the better business approach is to reclassify the employee as nonexempt and pay overtime when it is required.