DOL Proposes Increase to Salary Threshold for White Collar Exemptions to FLSA Overtime Pay Requirements

Breaking news:  Today, the United States Department of Labor has proposed an increase to the salary threshold for the white collar exemptions to the overtime pay requirements in the Fair Labor Standards Act.  As you all know, the FLSA requires covered employers to pay employees a minimum wage and, for employees who work more than 40 hours in a week, an overtime premium of at least 1.5 times the employee’s regular rate of pay.  Section 13(a)(1) of the FLSA, which was included in the original Act in 1938, exempts from the minimum wage and overtime pay requirements “any employee employed in a bona fide executive, administrative, or professional capacity.”  The exemption is commonly referred to as the “whitecollar” or executive, administrative, or professional (EAP) exemption.  The statute delegates to the Secretary of Labor (Secretary) the authority to define and delimit the terms of the exemption.  Since 1940, the regulations implementing the EAP exemption have generally required that each of the following three tests must be met:

(1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test);

(2) the amount of salary paid must meet a minimum specified amount (the salary level test); and

(3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test).

At present, the minimum salary threshold for exempt status under one of the white collar exemptions is $35,538.  Today’s DOL proposal seeks to increase the minimum salary threshold to $55,068.  In the event that the proposal is implemented, all employees earning salaries of less than $55,068 would be non-exempt and entitled to overtime pay for all hours worked in excess of 40 in a work week.  These employees would be required to keep time records of all hours worked to track overtime entitlement.

In addition to the foregoing, the DOL is also proposing to add a new § 541.607 to the FLSA regulations that would establish a mechanism for automatically updating the minimum salary threshold. Specifically, the Department proposes to automatically update the standard salary level every 3 years to reflect current earnings data.  Under this proposal, the Department would automatically update the standard salary level by adjusting it to remain at the 35th percentile of weekly earnings of full-time non-hourly workers in the lowest-wage Census Region (currently the South).

Stay tuned for further updates regarding this developing story!

For questions regarding the DOL’s proposal or any other labor and employment matter, please contact any of the attorneys at Hoffman & Hlavac.  To stay updated on key labor and employment law developments that affect your workplace, be sure to subscribe to this blog and follow us on social media!