For 15 years, the minimum salary threshold required for US workers to qualify for the Fair Labor Standards Act’s “white-collar” exemptions has been $23,660 per year.

On March 7, 2019, the Department of Labor issued a new overtime proposal increasing that minimum salary threshold to $35,308 per year. The DOL estimates the new rule will take effect in January 2020.

The proposed rule updates the FLSA’s overtime exemptions for executive, administrative and professional workers and replaces a 2016 rule that is currently enjoined. Recall that in June of 2015, the DOL proposed a salary threshold of $50,440. In May 2016, when the final rule was published, that threshold ultimately was set at $47,476. In the fall of 2016, however, the regulation was enjoined by a Texas federal judge just days before it was set to take effect. This left the required salary level at $23,660 — a threshold which has been in place since 2004.

According to the DOL, the new rule will make more than one million US workers overtime-eligible.

This is a more modest expansion than the rule proposed in 2016, which would have impacted about four million US workers.

Other proposed changes:

  • Raising the salary threshold from $100,000 to $147,414 for highly-compensated employees;
  • Regular increases to that threshold every four years following public notice-and-comment periods; and
  • Allowing employers to count certain nondiscretionary bonuses and incentive payments, like commissions,  for up to 10 percent of a worker’s salary level.

For now, the DOL declined to make any changes to the “duties test,” which is an element of the existing rule that helps identify job positions that are appropriately categorized executive, administrative, or professional and eligible for FLSA’s exemptions.

Once the proposal is formally published in the Federal Register, the public has a 60-day window for comment. The DOL will then review the comments and prepare a final rule. The rule is anticipated to take effect in January 2020.

For more, please reach out to your Baker McKenzie employment lawyer.