A new proposal from the U.S. Department of Labor seeks to increase the minimum required pay for salaried exempt employees to $1,059 per week ($55,068 per year), a more than 50% increase over current requirements. The DOL estimates that absent employer action, the change would cause 3.4 million workers to lose their exempt status, entitling the workers to overtime pay. The proposed regulation announced on August 30 must still undergo the mandatory rulemaking process, and it is not yet confirmed when the regulation, if enacted, would take effect.
The Fair Labor Standards Act requires covered employers to pay employees above a set minimum wage (currently $7.25 per hour) and an overtime premium of at least 1.5 times the employee’s regular rate of pay for all hours worked over 40 in a single workweek. However, tens of millions of workers fall within one or more of the FLSA’s many exemptions, including those for “white-collar” workers in executive, administrative, or professional positions. To satisfy these exemptions, employees must meet certain tests regarding their job duties and generally must be paid on a salary basis and earn at least the amount specified in DOL regulations, currently $684 per week ($35,568 per year).
If approved, the regulation would dramatically increase the minimum salary threshold, forcing employers to either increase employee pay or treat salaried employees earning under $1,059 per week as non-exempt employees and thus entitled to overtime. The proposed regulation further calls for automatic regular increases to the salary threshold every three years.
According to the DOL, the proposed regulation seeks to, in part, “fully restore the initial screening function of the salary level” when determining employees’ exempt status. However, similar efforts by the DOL in 2016 to dramatically increase the salary threshold failed after a federal judge found the regulation made “salary rather than an employee’s duties” the primary determinant of exempt status. Business groups will no doubt seek to test in court the agency’s latest proposal.
The public may comment on the proposed regulation for 60 days, after which the DOL will publish a final version of the regulation. The DOL has proposed, but not confirmed, that all aspects of the regulation would become effective 60 days after publication of the final rule. As a result, the earliest the regulation would take effect is January 1, 2024.
K|W|W attorneys will continue to monitor these developments. If you have any questions about the proposed regulation or other FLSA compliance matters, we encourage you to reach out to any K|W|W attorney. At K|W|W, your workforce is our priority.