Department of Labor Announces New Proposed Overtime Rule

On March 7, 2019, the Department of Labor (“DOL”) announced a new proposed overtime rule that would increase the minimum salary threshold under the Fair Labor Standards Act (“FLSA”) for certain overtime exemptions. The DOL says that the new proposed rule would make 1.1 million more American workers eligible for overtime pay. This article is an update to Attorney James Kremer’s February 4, 2019, article titled: “2019 Promises Revised Overtime Rules.”

The DOL’s proposed rule would increase the minimum salary threshold from $23,660 per year (or $455 per week) to $35,308 per year (or $679 per week) for certain “white collar” overtime exemptions (i.e., executive, administrative, and professional exemptions). This is less than the final rule adopted by the Obama Administration, which has not gone into effect as a result of legal challenges. To qualify for the “white collar” exemptions from the requirement to pay overtime, an employer must show that: (1) the employee is paid on a predetermined and fixed salary; (2) the employee meets the minimum salary threshold; and (3) the employee meets the requirements of the applicable job duties test. Unless all requirements are met, an employee must be paid overtime if he/she works more than 40 hours in a week.

Additionally, the DOL’s proposed rule includes the following noteworthy changes:

First, the proposed rule would allow employers to use non-discretionary bonuses and incentive payments that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.
Second, the DOL proposal would increase the total annual compensation requirement for “highly compensated employees” from $100,000 to $147,414.

Notably, the proposed rule does not contain an “auto-escalation” feature. Rather, the proposed rule contains a commitment to review the salary thresholds mentioned above every four years. Any future increases would require additional notice-and-comment rulemaking.

Please note that the rule is not yet final. The 60-day public comment period will begin once the proposed rule is published in the Federal Register. After the public comment period ends, the DOL will review the comments, make any necessary revisions, and then issue a Final Rule. The Final Rule is not expected to go into effect until early 2020.

DeWitt will continue monitoring the proposed rule and will provide periodic updates, as appropriate. For now, employers should review employee compensation and begin thinking about changes that need to be made once a Final Rule is announced. Please do not hesitate to reach out to your employment law attorney at DeWitt with any questions regarding this or any other wage and hour issues.