The U.S. Department of Labor (DOL) released its long-awaited Notice of Proposed Rulemaking (NPRM) to alter the overtime provisions of the Fair Labor Standard Act (FLSA) regulations on Tuesday, June 30. A copy of the NPRM is available on DOL’s website and formal publication of the NPRM in the Federal Register is expected to follow shortly. The proposed rule, which comes in response to a memorandum issued by President Obama in March 2014, seeks to modify overtime exemptions for white collar workers in the following key ways:
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Setting the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers (projected to be $970 per week in 2016, or $50,440 annually);
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Setting the highly compensated employee annual compensation level at the annualized value of the 90th percentile of weekly earnings for full-time salaried workers ($122,148 annually); and
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Establishing a mechanism to automatically adjust the salary and compensation levels each year using either a fixed percentile of wages or the CPI-U.
These proposed salary and compensation figures represent a dramatic increase, more than doubling the current salary thresholds. Under the current regulations, workers otherwise qualifying as executive, administrative, professional, and/or computer employees are exempt from the FLSA’s overtime provisions if they receive annual salaries of at least $23,660 ($455 per week). The separate provision exempting computer professionals with specified duties who earn at least $27.63 per hour would not be affected. Notably, the proposed rules do not include changes to the duties test applicable to the white collar exemptions, which many observers had anticipated.
Formal publication of the NPRM in the Federal Register will trigger a public comment period. In addition to comments on the proposed changes to the salary levels, DOL will be inviting comments on the possibility of allowing employers to credit nondiscretionary bonuses towards the required salary threshold. The DOL will also be seeking comments on the current duties tests, suggesting that changes could come in the final regulations.
