On May 7, 2019, the Wage and Hour Division (WHD) of the U.S. Department of Labor published a Notice of Proposed Rulemaking (NPRM) to revise “white collar” overtime exemption regulations. The DOL proposes to increase the minimum salary of exemption from $23,600 per year ($455 per week) to $35,308 per year ($679 per week). The DOL estimates the rule change will enable over one million new employees to become eligible to earn overtime unless employers increase their salaries to either meet or surpass the new threshold. Additionally, employees with an overall annual compensation of $147,414 (including at least $679 per week paid on a salary basis) – up from the current $100,000 total annual compensation – would qualify for exemption under the test for highly compensated employees (HCE).
The DOL’s proposed salary level for the “white collar” overtime exemption is based off a similar methodology that the DOL used in 2004 to establish the present salary level, applying updated salary data from the past several years. Additionally, the proposed rule requires the Department to examine the salary level every four years via notice-and-comment rulemaking rather than through an automatic updating process.
While the proposed rulemaking greatly increases the current salary threshold, it is significantly lower than the $47,476 yearly threshold proposed by the Obama administration in 2016. However, the Eastern District Court of Texas blocked the rule. The proceeding for the 2016 proposed rulemaking is currently stayed and will be dismissed as moot if the DOL adopts the new proposal as a final rule. Additionally, the newly proposed rule will permit employers to include bonuses and incentive payments such as commissions to satisfy up to 10% of the $679 per week salary requirement. Thus, even if an employee receives a weekly salary of less than $679 per week, they would qualify for the exemption if they receive bonuses that increase their weekly average above $679.
The proposed rule is subject to a 60-day “notice and comment period,” after which the DOL can modify the proposed rule based on submitted comments. Currently, the DOL estimates the new rule will take into effect by January 2020.