Department of Labor Proposes to Increase Minimum Salary for “White Collar” Overtime Exemptions
On March 7, 2019, the Wage and Hour Division of the U.S. Department of Labor, through its Acting Administrator Keith Sonderling, published the long-awaited Notice of Proposed Rulemaking (NPRM) to revise the “white collar” overtime exemption regulations. The DOL proposes to increase the minimum salary for exemption from $455 per week ($23,660 annualized) to $679 per week ($35,308 annualized). Employees with total annual compensation of $147,414 (including at least $679 per week paid on a salary basis) – up from the current $100,000 total annual compensation – would qualify for exemption under the test for highly compensated employees (HCE).
If adopted, the proposed rule would replace the final rule issued by the DOL on May 19, 2016, but enjoined by the Eastern District of Texas just weeks before its December 1, 2016 effective date. The 2016 final rule would have increased the minimum salary for exemption to $913 per week ($47,476 annualized) and the HCE total compensated requirement to $134,004.
As in the 2016 final rule, the DOL’s new proposal would allow employers to satisfy up to 10% of the $35,308 minimum salary requirement by the payment of nondiscretionary bonuses, incentives and commissions. However, the 2016 rule required that the bonuses be paid at least quarterly. Under the new proposal, the bonuses can be paid annually or more frequently.
Departing from the 2016 final rule, the DOL’s new proposal does not include automatic increases to the minimum salary level or the highly compensated test. Rather, the DOL “believes that the standard salary level and the HCE total annual compensation threshold should be proposed to be updated on a quadrennial basis (i.e., once every four years) through an NPRM published in the Federal Register, followed by notice-and-comment rulemaking.”
The DOL intends to rescind the 2016 final rule, noting that the $47,476 minimum salary level “excluded from exemption 4.2 million employees whose duties would have otherwise qualified them for exemption, a result in significant tension with the text of section 13(a)(1)” of the FLSA, which does not include a salary requirement. The Texas district court’s decision invalidating the 2016 final rule is on appeal to the U.S. Court of Appeals for the Fifth Circuit. That proceeding is currently stayed, and likely would be dismissed as moot if the DOL adopts its new proposal as a final rule.
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Tammy McCutchen is chair of the Federalist Society’s Labor and Employment Law Practice Group Executive Committee. This post was originally written for her law firm Littler Mendelson P.C. here and shared with her permission.