Employers should take note that the U.S. Department of Labor has at long last issued proposed rules regarding “white collar” exemptions from federal overtime requirements. Currently, the exemptions may apply if certain duties tests are met and the employee is paid on a salary basis of at least $455 per week, which comes out to $23,660 annually, assuming that some work is performed in each of the 52 weeks in the year. The proposed regulations would raise the salary threshold to $679 per week, which comes out to $35,308 annually.
The proposed rules would replace the Obama-era rule that set the threshold salary amount to over $57,000. A federal court permanently enjoined enforcement of that rule. The proposed rules mark the first effort by the Trump administration to address the white collar exemptions.
The proposed rules do not address the duties tests, but do address a few other issues. First, the salary threshold for highly compensated employees would be raised from $100,000 to $147,414, higher than the $134,004 threshold that the Obama era regulations tried to set.
Second, employees would be able to credit non-discretionary bonuses and incentive payments (e.g., commissions) toward the minimum salary level.
Third, the salary threshold would be revisited every four years.
If adopted, the final rules would go into effect in January 2020 and would result in an estimated 1,000,000 employees losing exempt status and thus becoming entitled to overtime. The Department of Labor set a 60-day comment period to give interested parties a chance to be heard on the proposed rules. The final rules will be issued at some point after that. Employers should pay close attention to the progress of the proposed rules because, if adopted, they will need to determine whether to increase salaries to meet the threshold or reclassify employees as non-exempt.
Keep in mind that many states have different, sometimes more favorable, salary threshold requirements. Where there is a difference between state and federal law on wage and hour issues, the provision most favorable to the employee must be applied.