As previously reported in our Employment Law Spotlight blog, after the March 7 unveiling by the DOL of its longawaited proposed rule – which would make more employees eligible for statutory overtime pay – on March 22, the DOL announced the official publication of its Notice of Proposed Rulemaking in the Federal Register and the commencement of the 60-day period for public comments.
Most notably, the DOL's new rule will increase the minimum salary required for an employee to qualify as exempt from the FLSA's overtime requirements from $455 to $679 per week ($35,308 annually, up from $23,660). In addition, the new rule:
- Boosts the total annual compensation requirement for employees to qualify for the "highly compensated employee" exemption from $100,000 to $147,414 per year.
- Permits employers to use nondiscretionary bonuses and incentive payments, including commissions and other payments tied to productivity and profitability, paid on at least an annual basis, to satisfy 10% of the minimum salary threshold.
- Commits the DOL to conducting periodic reviews of the minimum salary threshold in order to update the amount, keeping it in line with future wage rates and inflation, although any future increases would not be automatically implemented but would instead be subject to the noticeand-comment rule-making requirements.
Importantly, the DOL's proposed new rule does not make any revisions to the duties requirements of the overtime exemption rule.
The proposed new rule also does not change the regulations governing overtime for police officers, firefighters, paramedics, nurses, and laborers such as nonmanagement production line employees and nonmanagement employees in maintenance, construction and similar occupations.
On March 29, the DOL published its newly proposed rule, triggering a 60-day public comment period that expired May 28. Presumably, the DOL will be reviewing the comments it receives and publishing its final rule, though the final rule's promulgation date is uncertain. Given the anticipated political and judicial battles over what the new threshold should be, it is not clear what overtime salary exemption threshold ultimately will emerge. While an increase in the threshold is likely, the amount and effective date of the increase remain uncertain.
While we anxiously await what new threshold (if any) will emerge, employers should – as will we – closely monitor administrative, judicial and legislative developments relating to the proposed increase in the salary exemption overtime threshold. Employers should also begin preparing now to ensure that their payroll procedures comply with the new rule by first reviewing payroll and salary records to determine which employees would no longer be exempt under the higher salary requirements. For those employees, companies will need to decide whether or not to keep the compensation rates the same but begin paying these employees overtime for all hours worked over 40 in any given workweek or increase their annual salary to meet the new $35,308 salary threshold. Employers are not limited solely to increasing annual salaries, however. The new rule does give employers the option of using annual bonuses and incentive payments to satisfy up to 10% of the salary threshold, including a yearly catch-up payment at the end of the year. Employers may not, however, use bonuses and incentive payments to meet the new minimum salary threshold for the highly compensated employee exemption. Further, employers must remember to check state and local minimum salary thresholds, which must also be adhered to.
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