The US Department of Labor (DOL) may seek again, in 2023, to raise the salary threshold for a person to fit within a Part 541 white-collar exemption. The agency was going to announce its plans in April but it has been delayed. The reasons are unclear, perhaps concerns about inflation or the effects on small businesses. With that said, as the election cycle is over, it can be anticipated that a proposal will be coming, probably next year. Look for a (proposed) large increase in that threshold amount.
As of today, that salary minimum is $684 per week ($35,568 per year); the agency is expected to seek an increase to $900-1000 per week, somewhere in the $50,000 per annum range. The Obama DOL wanted a raise to $913 per week, but a court enjoined that increase and so the salary was raised from $455 to $684 a week. DOL officials do not believe this is enough, as do worker advocacy groups who want it raised even higher, so more people will be eligible for overtime.
Naturally, business organizations oppose the possible increase. For example, many exempt employees do not want to be re-classified even if it means they will start getting overtime because of the “blue collar-white collar” psychological status issue associated with “hourly” status. The Chamber of Commerce has stated that “surveys showed that many previously exempt employees valued the flexible hours and work schedules that exempt status provided.”.
Commentators have opined that there might be more than just money involved in the next DOL proposal. There could be modifications of the exempt duties tests. There might also be (as had been proposed previously) an escalator or cost-of-living type adjustment (most likely upwards) to the salary threshold. The salary level for Highly Compensated Employees (now $107,000) might also be increased. In sum, as a DOL spokesperson has recently stated “the Wage and Hour Division is still developing a proposal updating overtime regulations under the Fair Labor Standards Act. The division held multiple stakeholder listening sessions in 2022, and DOL continues working toward this proposal.”
The Takeaway
So what should employers do to prepare? Take a look at all employees classified as exempt and make sure that their duties, as actually performed, fit within one of the white collar exemptions, e.g. executive, administrative, professional. If they are truly exempt now, or more to the point, borderline exempt, employers need to decide whether to raise their salaries to the required minimum or whether it may be more prudent to re-classify the employees to non-exempt, although they may still continue to be paid a salary. There are issues with conversion, the most difficult of which may be the “psychological” effect of conversion and the switch from white collar to blue collar.
Or, if they are then receiving overtime pay, it may not matter…
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