The U.S. Department of Labor is revisiting possible increases to minimum salary thresholds for exempt employees.
To be correctly classified as exempt under certain “white collar” exceptions under the Fair Labor Standards Act (FLSA), employers must meet two tests: a) minimum salary requirement; and b) job duties requirements. For most exempt classifications, the current minimum salary threshold is $23,660 per year (or $455 per week), and has been for many decades. The U.S. Department of Labor (DOL) has proposed rules to increase this minimum salary requirement to $35,308 (or $679 per week). As many will recall, the DOL sought to increase the minimum salary back in 2016 to $47,476, but the regulations were challenged in Court and put on hold. After the 2016 presidential election, the proposed rules were abandoned. Although the DOL had hinted that an adjustment to the minimum salary would still be forthcoming, and many speculated it would be a more moderate increase, clarity was not provided until recently on what the adjustment might look like.
The DOL’s proposed regulations would also:
- Increase the salary threshold for employees meeting the highly compensated employee classification from $100,000 to $147,414. Generally speaking, employees meeting the minimum annual compensation for highly compensated employees have a less restrictive duties test.
- Maintain the current minimum annual salary level of $23,660 for employees in the US territories of Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands and of $19,760 for employees in American Samoa
- Allow employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test, as long as such payments are paid annually or more frequently
- Propose updates to the minimum salary levels every four years through notice-and-comment rulemaking to “prevent the earnings threshold levels from becoming significantly outdated in the future and to provide predictability and certainty for the benefit of workers and employers”
The DOL estimates that an additional 1.1 million workers who are currently exempt from overtime will become eligible for overtime unless their employers opt to raise their salaries to meet the new minimum salary requirements or otherwise adjust their work schedules. The comment period on the new regulations will remain open for 60 days from the time the proposed regulations are officially published in the Federal Register. Stay tuned for further information, including whether this new salary requirement is formally adopted and an effective date for the change. It is currently projected that the proposed regulations would take effect in January 2020.
About the Author
Michelle B. Ferguson leads Ireland Stapleton Pryor & Pascoe, PC’s Employment Law practice group. Her practice focuses on preventative employment law finding ways to keep businesses out of court by being proactive in identifying and solving employment issues before a claim is filed. She can be reached at 303-628-3658 or firstname.lastname@example.org.
What is written here is intended as general information, and is not to be construed as legal advice. If legal advice is needed, you should consult an attorney.