DOL Announces Major Proposed Changes to Employee Exemption Rules

The U.S. Department of Labor has finally issued its proposed amendments to the Fair Labor Standards Act (FLSA), and the proposed changes are substantial.  Specifically, they increase the minimum salary threshold for white collar exemptions from $23,660/year ($455/week) to $50,440 ($970/week).  This means that executive, administrative, and most professional and outside sales employees would need to receive overtime pay for all hours worked in excess of 40 per week unless the employee earns a salary of at least $50,440 per year.  Currently, only 60% of full-time salaried employees earn at least that much, according to data provided by the Bureau of Labor Statistics.

President Obama had directed the DOL to issue new regulations over a year ago, with the intent of expanding overtime pay to more workers.  If approved, the DOL estimates the new amendments would grant overtime rights to nearly five million workers who are currently exempt from the FLSA’s overtime requirements.

The proposed amendments will also have an impact on higher wage earners.  Currently, highly compensated employees-defined as earning more than $100,000 in annual total compensation-are exempt from overtime compensation if they meet a scaled-down version of the “primary duties” test discussed above.  The DOL proposes increasing this salary threshold to $122,148 annually, which is equal to the 90th percentile of earnings for full-time salaried workers.

While these are only proposed regulations, which may change after the required public notice and comment period, it is clear that the FLSA’s minimum salary threshold for exempt employees will increase significantly.  For more details on these proposed changes and the FLSA exemptions, visit our blog, The Law@Work.