The DOL Splits the Baby In Its New Proposal to Increase the Salary-Level Threshold for White Collar Exemptions

During the Obama administration, the United States Department of Labor ("DOL") issued a new overtime rule updating the salary threshold requirement for the executive, administrative, and professional ("white collar") exemptions available under the federal Fair Labor Standards Act ("FLSA") from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). This substantial increase could potentially impose a significant financial burden on employers of all types.

However, before the Obama-era DOL's rule went into effect, a federal judge for the United States District Court for the Eastern District of Texas blocked the rule's implementation by finding that the DOL exceeded its legal authority in implementing the rule.

Now, one presidential administration later and at long last, the DOL proposed another new rule to increase the salary threshold requirement for the white collar exemptions to $679 per week ($35,308), approximately half the amount of the Obama-era DOL increase.

Additionally, the new DOL rule, if finally implemented, will allow employers to include certain non-discretionary bonuses and incentive payments as up to 10% of the new $679 per week salary threshold, and will increase the total annual compensation requirement for highly compensated employees from the current $100,000 per year to $147,414 per year.

The DOL also communicated that it intends to propose updates to earnings thresholds at a rate of every four years.

According to the the DOL announcement, the $679 per week threshold will expand overtime eligibility to more than one million additional U.S. workers.

Employers will have a 60 day comment period beginning when the DOL's Notice of Proposed Rulemaking regarding the new salary threshold is published in the Federal Register. Now's the time for employers to consider how the new salary threshold will impact their enterprise and submit their comments.

Finally, employers should take proactive steps to prepare for implementation of the new rule. Its time for employers to conduct wage and hour audits to ensure their "exempt" employees are properly classified and to identify where compensation adjustments are or will become necessary.