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Tina Tellado is a Partner and Deisy Castro is an Associate based in Holland & Knight's Los Angeles office
The U.S. Department of Labor (DOL) announced on March 7, 2019, its much anticipated proposed changes to the overtime exemption rules under the Fair Labor Standards Act (FLSA). Specifically, the DOL's proposed rule will raise the salary requirements for the "white collar" exemptions to the overtime and minimum wage requirements under the FLSA to $679 per week, which annualizes to $35,308.
The FLSA exempts executive, administrative, professional, outside sales and computer employees from its minimum wage and overtime pay requirements if the employees are paid on a salary basis at or above a minimum weekly salary, in addition to meeting additional requirements relating to their primary job duties. The DOL's proposed rule increases the weekly minimum to $679 from the current $455 ($23,660 per year). The current minimum salary requirement has been in place since 2004. The DOL's proposed rule does not impact the primary job duties standards applicable to these exemptions.
In addition to the increase to the salary floor for the "white collar" exemptions, the DOL is proposing updating the annual minimum compensation level for the "highly compensated employee" test to $147,414. The proposed rule also would permit employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the minimum salary requirements.
The DOL has also expressed its intention to propose updates to the compensation thresholds every four years, but only after receiving comments from the public. The DOL estimates that the proposed rule will take effect in 2020 and result in 1.1 million employees becoming eligible for overtime.
The DOL's proposed changes were announced in a Notice of Proposed Rulemaking (NPRM) after receiving extensive public input. Nonetheless, the proposed rule as written is not final and the DOL encourages the public to submit comments about the proposed rule in the rulemaking docket RIN 1235-AA20. The public is able to submit comments for consideration for 60 days after the proposed rule is published in the Federal Register. Following the close the comment period, the DOL may revise the rule before it is finalized and published in the Federal Register.
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