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U.S. DOL "Springs Forward" with Increased Salaries for Overtime Exemptions U.S. DOL "Springs Forward" with Increased Salaries for Overtime Exemptions

U.S. DOL "Springs Forward" with Increased Salaries for Overtime Exemptions

On Thursday, March 7, 2019, the U.S. Department of Labor (DOL) released its proposed new regulations concerning the minimum salary level required for most of the "white-collar" (i.e., Administrative, Executive and Professional) overtime exemptions under the Fair Labor Standards Act (FLSA). Under the proposed rule, which is subject to a period of public comment and potential revision before implementation, the minimum salary for most white collar exemptions would increase from $455 per week ($23,660 per year) to $679 per week ($35,308 per year).

The proposed rule represents a more modest increase to minimum pay levels than the final regulations issued by the DOL under the Obama administration in 2016, which were blocked by a last-minute federal court injunction and never implemented. Under those regulations, the minimum weekly salary was set to increase to $913 per week ($47,476 per year) and was subject to automatic increases every three years. The new proposed regulations contain no automatic increases, though the DOL did invite comment on a provision requiring a periodic review of minimum salary levels.  

There are, however, several key aspects of the 2016 regulations that have carried over into the new proposed rule. As was the case with the 2016 regulations, the new proposed rule deals exclusively with salary levels and does not alter any of the "duties" tests applicable to the white-collar exemptions. Like the blocked 2016 regulations, the proposed rule includes a significant salary increase for the "Highly Compensated Employee" exemption (from $100,000 annually to $147,414—significantly more than the $134,000 called for by the 2016 regulations). Finally, the new proposed rule also allows employers to pay up to 10% of the minimum salaries with nondiscretionary bonuses and other incentive payments, such as commissions.

It is likely that some entry level management and administrative jobs may need to be reclassified as eligible for overtime pay. Or, for those with market salaries closer to the $35,000 range, employers may just choose to raise minimum salaries for these positions. 

It is important to note this is a proposed rule and will not go into effect until after the comment period concludes, subject to any further revisions. Additionally, it is likely the final rule will not go into effect immediately after being issued. The 2016 final rule, for example, was announced on May 23, 2016, with an effective date of December 1, 2016. Another court challenge prior to implementation remains a possibility as well.

As the rulemaking process proceeds, Ice Miller will keep you updated. In the meantime, if you have questions about the proposed rule or any wage and hour issue, please feel free to contact Ice Miller partners Manolis Boulukos, Tami Earnhart, Paul Bittner or any other member of Ice Miller's Labor, Employment & Immigration Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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