The U.S. Department of Labor's Wage and Hour Division
("Department") recently published a Notice of Proposed
Rulemaking (the "Proposed Rule"), Defining and Delimiting the Exemptions for
Executive, Administrative, Professional, Outside Sales, and
Computer Employees. The Proposed Rule suggests increasing
salary thresholds for overtime pay for certain executive,
administrative and professional employees under Section 13(a)(1) of
the Fair Labor Standards Act ("FLSA").
The FLSA generally requires covered employers to pay overtime pay
of one and one-half times the regular rate of pay for all hours
worked over 40 in a workweek, unless the employee is considered
"exempt" from overtime pay. For certain exemptions to
apply, and thus for the employee to be "exempt" from
overtime pay, the employee must satisfy certain salary thresholds.
Currently, for these exemptions, employees must earn a salary at
least $684 per week, or $35,568 annually, and be "employed in
a bona fide executive, administrative, or professional
capacity."1 Additionally, "highly
compensated" employees are considered exempt when they earn a
salary of $107,432 or more per year.2
The Department's Proposed Rule recommends increasing the
salary thresholds for those exempt employees who must be paid on a
salary basis. Specifically, the Proposed Rule would increase the
annual salary threshold for executive, administrative and
professional exempt employees from $35,568 to $55,068, and from
$107,432 to $143,988 for the highly compensated employee exemption.
This means that if the Proposed Rule is adopted, employees earning
between $35,568 and $55,068 annually would no longer be exempt from
overtime pay. Moreover, the Proposed Rule proposes automatically
updating the minimum salary thresholds every three years to reflect
then-current earnings data.
The Department is accepting public comment about the Proposed Rule
until November 8, 2023. Employers interested in submitting comments
are encouraged to utilize the Federal eRulemaking Portal at https://www.regulations.gov. After considering
all comments to the Proposed Rule, the Department will then likely
publish a final rule, which would then become law.
Although the Proposed Rule is not final and has not taken effect,
employers should review their current job classifications for
salaried, exempt employees to determine how many of these employees
earn between $35,568 and $55,068 annually. Employers should then be
prepared either to raise these currently exempt employees to the
new proposed threshold, or to convert these employees to non-exempt
status. In reviewing these options, employers should consider the
impact of overtime payments to any potential non-exempt employees.
Additionally, employers also should review their wage and hour
policies and procedures, including those related to timekeeping and
overtime, to ensure compliance with applicable state and federal
law.
If you have any questions about the Department's Proposed
Rule, or how it may impact your organization, please contact your
Kutak Rock attorney, a member of the firm's National Employment Law Group or FLSA Litigation and Wage and Hour Defense
Group.
U.S. Department of Labor Proposes Changes to Overtime Exemption Salary Thresholds
Footnotes
1 29 U.S.C. § 213(a)(1). This exemption also
includes certain employees holding outside sales and computer
positions. See generally id. at § 213.
2 29 C.F.R. § 541.601(a)(1).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.