DOL Proposes Updates to the Overtime Rule to Account for Inflation Over the Past 15 Years

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Last week, the Department of Labor ("DOL") announced new proposed revisions to the Overtime Rule. This is not the first time in recent years that revisions have been proposed to the so-called “white collar exemptions” contained in the Fair Labor Standards Act. Because a 2016 proposal to nearly double the salary threshold for white collar exemptions was enjoined by a federal court and later shelved, this would be the first change to the salary threshold since 2004.   
 
The proposal would, if adopted, increase the minimum salary that must be paid in order to qualify for the white collar exemptions from the current minimum salary threshold of $23,660 to $35,308 per year (from $455 to $679 per week). The DOL used the same methodology they used in 2004, but adjusted for inflation, to determine this proposed salary basis. This is in line with testimony by Secretary of Labor, Alexander Acosta, in his Senate confirmation hearing.
 
The proposed rule also would increase the salary basis for so-called “highly compensated employees” (employees for whom only a minimal showing is needed to establish they are exempt) from the current level of $100,000 to $147,414 per year. It also would allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the required salary level. Notably, the proposed rule would not change any of the existing job duties tests.
 
It is important to note this proposal does not immediately (or automatically) take effect. Instead, the proposal will go through the administrative rulemaking process, which includes a 60-day period for public comment. It is possible, however, the proposed rule could become a final rule prior to the 2020 election cycle.
 
In addition to changes to the salary threshold, the DOL also is seeking comment on language for periodic review to update the salary threshold, but it does not allow for automatic changes. Any new increases would be subject to the DOL’s standard notice-and-comment rulemaking.
 
The DOL press release on its proposed rule is available here, and you can review the proposed rule and request for comments here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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