The Department of Labor (DOL) last month issued a Notice of Proposed Rulemaking related to the overtime provisions of the Fair Labor Standards Act (FLSA).
While this notice is simply a proposal and does not necessarily reflect the final version of the rule, the notice provides a good indication of the likely changes to the FLSA that employers can expect in the future.
Employers may recall that in 2016 the DOL issued a final rule that would have increased the threshold salary requirement for the white collar exemptions under the FLSA. The 2016 rule, which would have doubled the requisite salary, was enjoined by a federal court and never enforced. The new proposed rule would increase the salary threshold from its current level of $455 per week to $679 per week. This change would result in an increase of the annual required salary to $35,308. The DOL estimates that this increase will result in nearly a million more individuals being eligible for overtime pay under the FLSA.
In addition to proposing an increase to the salary requirement for exemptions, the proposed rule also includes an increase of the total compensation requirement for highly compensated employees from its current level of $100,000 to $147,414. Likewise, the rule further provides that as much as 10 percent of an employee’s salary for purposes of meeting either salary basis test can be from non-discretionary bonuses (i.e. compensation tied to productivity, profitability, etc.) and/or commissions.
While the rule includes language related to a periodic review of the salary threshold, it does not provide for automatic adjustments. The DOL comment period for the proposed rule is currently open, and members of the public may submit comments concerning the proposed rule to the DOL at www.regulations.gov until May 21, 2019. After the comment period ends, the DOL will consider the public comments before issuing its final rule.
Given the past statements of the current secretary of the Department of Labor, along with the fact that the FLSA’s salary thresholds have not been increased since 2004, it appears highly likely that the final rule will include an increase in the salary requirements. Therefore, employers should evaluate their exempt employees to determine if changes will need to be made by either increasing an employee’s salary or changing the employee’s FLSA status to non-exempt.