DOL Proposes Modest Salary Increase for Overtime Exemptions

Generally, employees are entitled to be paid time-and-a-half for hours if they work over forty hours in a week. Under the Fair Labor Standards Act (“FLSA”), employers may claim an exemption if they pay employees a salary of at least $455 per week, which equates to $23,660 annually. This $455 per week salary level was set almost 15 years ago.

Finally, on March 7, 2019, the Department of Labor announced a proposed rule that would set the standard salary level to $679 per week, equating to $35,308 per year. The new rule also includes an increase to the total annual compensation requirement for “highly compensated employees” (HCE), from the currently-enforced level of $100,000 to $147,414 per year and allows employers to 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. These changes come after an injunction blocked the previous and hotly debated rule which was set to be effective late 2016, which increased the standard salary level to $913 per week, representing the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. 

Importantly, the new proposed rule contains no changes to the existing job duties tests contained in the FLSA’s exemptions.  Therefore, even workers who make at least this salary level may still be eligible for overtime if the exemption’s job duties requirements are not met.  

The Department will consider all timely comments in developing a final rule. Nichols Kaster previously provided comments in support of the proposed increase to $913 per week and expects to file comments regarding the new proposed rule.  While the proposed $679 per week salary level increase will make about million more workers eligible for overtime, it does not go far enough. A salary level of $913 would have made about 4.2 million more workers overtime eligible.

The public will have 60 days, which starts running on the date the proposed rule is published in the Federal Register.