On March 7, 2019, the Department of Labor (DOL) Wage and Hour Division announced a Notice of Proposed Rulemaking (NPRM) for an updated overtime rule under the Fair Labor Standards Act (FLSA). If the proposed overtime rule goes into effect, over one million workers who are not currently eligible for overtime pay may be eligible. This may be a touchy subject for some organizations as the DOL Wage and Hour Division issued a similarly proposed rule in 2016 that would have increased the salary threshold from $455 per week, or $23,660 annually, to $913 per week, or $47,476 annually. Ultimately, the 2016 proposed increase to the salary threshold was blocked by a federal judge. This means that since 2004 the salary threshold has been unchanged. However, this has also not gone unnoticed.
In developing the proposed rule, the DOL received extensive public input from six in-person listening sessions held around the nation and more than 200,000 comments were received as part of a 2017 Request for Information (RFI). Commenters who participated in response to the RFI, or who participated in a listening session overwhelmingly agreed that the current and enforced salary and compensation levels need to be updated.
If the proposed rule is passed, the salary threshold would be updated to $679 per week, or $35,308 annually. The salary threshold increase is not the only thing that would change under the proposed rule. The proposed rule also notes an increase in the total annual compensation requirement for “highly compensated employees” (HCE) from the current level of $100,000 to $147,414 per year. Additionally, the proposed rule would allow employers to use “nondiscretionary bonuses and incentive payments” (including commissions) that are paid annually or more frequently to satisfy up to ten percent of the standard salary level.
Also included in the NPRM, the DOL Wage and Hour Division noted that under the proposed rule there would be a commitment to a “periodic” review of the salary threshold and to update it, as appropriate. Unlike the 2016 proposed rule, the new proposed rule does not call for automatic adjustments to the salary threshold. This is important to note due to the amount of time,15-years, that has passed since the rule was last updated.
While the list of changes has been covered above, here is what will not be changing assuming that the proposed rule is passed. The duties test for the administrative, executive, and professional exemptions will remain the same under the proposed rule. Also remaining unchanged in the proposed rule are overtime protections for the following classifications:
- Police Officers
- Fire Fighters
- Laborers including: non-management production-line employees
- Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and other construction workers.
In summary, the DOL Wage and Hour Division has issued a NPRM that would increase the FLSA salary threshold from the current rate of $455 per week, or $23,660 annually, to $679 per week, or $35,308 annually. Currently, the proposed rule is in a “comment period” where the DOL Wage and Hour Division will consider any and all comments. The proposed changes are anticipated to take effect in early 2020. For employers who have employees who are currently earning $35,308 or less, and are currently exempt from the FLSA’s overtime rules, it would be wise to pay very close attention to the new ruling as it potentially comes to fruition and to adjust pay practices accordingly when a final determination is made.
Written By: Patrick McKenna, SHRM-CP