Updated: Sep 16, 2020
On March 7, 2017, the Department of Labor (DOL) proposed an increase in the salary-level threshold for white-collar exemptions from $23,660 to $35,308. Should the proposed ruling be finalized, this would expand overtime eligibility by more than a million currently exempt workers as nonexempt and an increase in pay for those above the new threshold. The act does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.
Current salary threshold at $23,660 = $455 per week = $11.38 per hour at 40 hours
Proposed salary threshold at $35,308 = $679 per week - $16.98 per hour at 40 hours
What is an Exempt vs. Nonexempt employee?
The terms "exempt" and "non-exempt" refer to job classifications of employees and the exemption of certain job classifications from overtime pay and minimum wage requirements. According to the Fair Labor Standards Act ("FLSA"), some employees are exempt from the payment of an enhanced rate of pay for each hour over forty (40) in a work week, also known as 'overtime'. Under the FSLA employees employed as "bona fide executive, administrative, professional and outside sales employees" and "certain computer employees" may be considered exempt from both minimum wage and overtime pay. The DOL also has other specific types of employees considered exempt from both minimum wage and overtime requirements. The full list can be found on the DOL website.
Who will this proposed rule impact?
The new rule may be a win for workers; however less excited of the potential change and feeling the most impact would be small to mid-sized employers. Many large employers may consider this proposed ruling a "non-event" as several may have already changed to comply with Obama's administration rule back in 2016, before it was struck down by a federal judge in Texas the following year, which had the ceiling set at $47,476 per year.
Employers Next Steps
Employers should pay close attention to this ruling should it be finalized, and begin planning now on how they will adopt it. All the while being mindful of other state and local considerations, such as alternative compensation thresholds and notice requirements.