DOL Proposes Large Increase to Salary Threshold for Exemptions from Overtime Pay
On June 30, 2015, the U.S. Department of Labor issued a notice of proposed rulemaking (NOPR) that would significantly increase the amount of workers who will qualify for overtime under the Fair Labor Standards Act (FLSA). The new regulations more than double the pay threshold for “white collar” exempt employees from $455/week to $970/week, or from $23,000 a year to $50,400 a year. Thus, most employees earning less than $50,400 a year will automatically be entitled to overtime under the FLSA, regardless of their duties or responsibilities. Additionally, the proposed rule raises the FLSA’s “highly compensated” exemption from $100,000 to $122,148 for employees who are “customarily and regularly” performing at a least one of the functions or duties required under the executive, administrative or professional exemptions.
As a reminder, the white collar exemptions are: 1) the employee must be paid a fixed and predetermined salary that is not subject to reduction because of variations in the quality or quantity of work performed; 2) the amount of salary must meet a minimum specified amount; and 3) the employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations, a/k/a meet “the duties test”.)
In a surprise move, the DOL did not propose regulatory changes to the duties tests associated with the white collar exemptions, although in seeking comments for the duties tests there is speculation it may issue future proposed revisions which require exempt employees to spend a minimum specified amount of time performing their primary duty (such as California, which currently requires that exempt employees spend at least 50% of their time performing their primary duty) and limiting the amount of non-exempt work that an exempt employee may perform. The DOL’s NOPR did include a provision for comments on whether to allow nondiscretionary bonuses, such as certain production or performance bonuses, to satisfy a portion of the standard salary test requirement. The current test requirement does not include this type of compensation.
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