U.S. Department of Labor Proposes to Raise the Overtime-Exempt Salary Threshold Under the FLSA

On March 7, 2019, the United States Department of Labor (“USDOL”) proposed changes to the regulations governing the minimum salary required to qualify for the “white-collar” exemptions from overtime under the Fair Labor Standards Act (“FLSA”). The proposed changes also address incentive-based pay, highly compensated employees, and how frequently salary threshold amounts under this rule should be revisited.

USDOL’s proposed changes would increase the minimum salary required for the exemption from $23,360 to $35,308 (a rate increase from $455 per week to $679 per week). The proposal also includes a provision that would allow non-discretionary bonuses and incentive compensation (e.g. commission or other incentive-based payments) to satisfy up to 10% of the required salary, so long as the bonuses and incentives are paid at least annually.

The changes also propose an increase in the amount an employee must be paid to be considered a “highly compensated employee.” Finally, USDOL’s proposal suggests that the earning thresholds should be revisited every four years. The proposed revisions do not, however, make changes to the duties tests regarding professional, executive, and administrative employees.

Public comment will be accepted on the proposed rule for the next sixty days. If accepted, the proposed rule would likely take effect on January 1, 2020.

Should the proposed rule go into effect, there are a variety of strategies available to employers interested in minimizing their exposure to additional overtime costs. Please contact Drummond Woodsum’s Labor and Employment team if you would like to discuss these strategies.