It’s been fifteen years since the salary threshold for overtime eligibility was
If the DOL’s new overtime rule proposal sounds familiar, it’s because the department released a similar proposal in 2016 during the Obama Administration. Specifically, in May 2016, the DOL issued a series of finalized rules doubling the $455 minimum salary level to $913 a week (equivalent to $47,476 per year) and raising the total annual compensation required for the “highly compensated employee” exemption to $134,004. The Obama-era proposal also included automatic increases to the salary threshold every three years. The new minimum threshold was set to take effect on December 1, 2016, with the first automatic adjustment beginning on January 1, 2020. However, just days before the official roll out of the 2016 final rule, a federal judge in the U.S. District Court for the Eastern District of Texas declared it invalid and issued a preliminary injunction blocking the final rule from being implemented nationwide. Seeking to resolve the uncertainty that has lingered in the last two and a half years, the proposed rule that the DOL released on March 7 dials back many of the more controversial elements of the 2016 rule.
So what has and has not changed?
If adopted as proposed, the new rule would:
- Boost the minimum salary level required for an employee to be exempt from overtime wages from $455 to $679 per week, a more palatable figure for employers than the $913 weekly salary proposed in 2016;
- The exemption threshold for “highly compensated employees” would jump from $100,000 to $147,414 per year, a salary hike notably higher than the level proposed under the Obama Administration’s proposed rule;
- Permit employers to use nondiscretionary bonuses and incentive payments – e.g., commissions – that are paid annually or more frequently, to satisfy up to 10% of the standard salary level;
- Commit the DOL to consider an update to the salary threshold every four years through the notice-and-comment rulemaking process, rather than require automatic adjustments every three years;
- Leave the job duties
- Maintain the same overtime protections
for:police officers, firefighters, paramedics, nurses, and laborers including:non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and construction workers.
- Identify current exempt employees who are paid less than $35,308 annually and determine how many hours per week employees in this compensation range work.
- Evaluate whether it makes better financial sense to raise certain employee salaries to the new threshold or to simply make the employee eligible for overtime should the new rules take effect.
Although the duties test remains unchanged under the proposed rule, reexamine current job descriptions and duties and consider if exempt tasks should be reassigned or maintained if the particular employee loses his/her exempt status.