April 26, 2019
What Employers Should Know About Proposed Overtime Regulations
by Alicia Nesline Shaw, Carlile Patchen & Murphy LLP
Employers take note: the salary thresholds for exempt status under the Fair Labor Standard Act are going up, although not as substantially as they were scheduled to increase back in December of 2016. Exempt employees under the FLSA are those who satisfy both the job duties and salary requirements of their applicable exemption, and are not entitled to overtime wages.
As a refresher, in 2016 all the attorneys and HR specialists who represent and counsel management on employment matters were prepping our clients for an increased annual salary threshold from $23,660 to $47,476 per year for most exemptions, and from $100,000 to $134,000 per year for workers exempt as highly compensated employees.
Needless to say, that increase would have affected employers of all sizes and careful planning and evaluation needed to be made to assess whether an exempt employee who made less than $47,476 per year should receive a salary increase or be converted to nonexempt and paid overtime. It was a real dilemma for some employers. As a practical matter, it pushed most employers to come up with a plan of action that would result in compensation changes to segments of their workforce. Roughly a week prior to the 2016 regulations taking effect, however, a Federal District Court in Texas issued an injunction against their enforcement. Since then, the Department of Labor has enforced only the previous salary thresholds.
On March 7, however, the DOL announced its proposed and revised rules regarding exempt salary thresholds, which are expected to take effect Jan. 1, 2020. The revised regulations increase the salary threshold from $455 to $679 per week, which equates to an increase from $23,660 to $35,308 annually. The salary threshold would increase from $100,000 to $147,414 per year for highly compensated employees. In addition, the proposed rules would allow employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the required salary level. There are currently no proposed changes to the job duties required for any exemption, and of course, an exempt employee must continue to satisfy both the applicable job duties and salary threshold for their particular exemption.
The DOL anticipates this change to affect approximately one million employees. The proposed rules are currently in a public comment period, which lasts through the beginning of May. After which, the DOL is expected to approve the rules for implementation on Jan. 1, 2020. Unless something unexpected transpires, employers should expect to once again review their exempt employees' compensation to make certain it will continue to qualify them as exempt, and be prepared to make adjustments if it will not.
Source: U.S. Department of Labor